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How to avoid your personal loan being rejected

Learn what you need to do to get your personal loan application across the line.

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There is no way of knowing whether you will be approved for a personal loan. Not only that, but credit reporters keep a record of every personal loan rejected status on your credit file. Even if you get just one rejection, the next lender you apply with may see this as a red flag. Depending on your circumstances, this could be enough to reject you again.

There’s no magic trick to guarantee a lender will say yes, but there are some ways you can avoid being denied the finance that you need. Read on to find out common personal loan rejection reasons and what you can do for a higher chance of approval.

The most common personal loan rejection reasons

  • You have a bad credit history. While all “bad credit” is usually pooled into one, there are varying levels. For example, you may never have defaulted on any loan or credit card payment, but you could have applied for five loans in the past two months. Check your credit score to see where you stand before applying. If it’s anything less than ‘good’, your chances of approval will be less than someone with a good to excellent score.
  • Insufficient income. Lenders won’t approve your application if your income can’t sustain the monthly repayments. Lenders usually have a minimum income you need to earn to be eligible for a loan, so check if there is one set. If not, work out what repayments you need to make and if they are manageable on your income.
  • Dubious loan purpose. Check you can finance what you need to with the loan. Many loans come with restrictions as to how the funds are used. If your lender finds out your loan purpose isn’t credible, your chance of rejection is quite high.
  • Incorrect details. Lenders usually verify the details you put in your application and if they find inconsistencies, they may reject you.
  • Unstable employment or insufficient employment history. Lenders are very meticulous about the stability of your job. Some lenders insist you should have a stable job and have finished your trial period. Trial period times may differ, but they typically run for three months in New Zealand. Lenders usually require three months of payslips or six months for casual employees, so if you are unable to show these, they have grounds for denying your application.
  • You hold too many loans. If you currently have several loans, store cards or credit cards with outstanding balances, this could give a lender cause to reject you.
  • The low value or type of secured assets. Lenders may have restrictions on the type of asset you can use as collateral for a secured loan, so if your asset doesn’t meet these requirements your loan could be rejected. For example, some lenders only allow you to take out a long term loan of seven years if you have property to use as security, and car loans usually have an age restriction on the vehicle you are purchasing.

How to avoid your personal loan being rejected

You’ve seen the reasons your personal loans are rejected, so how do you avoid these?

  • Check the credit requirements. You should check what credit rating your lender requires, and then see if you meet them. If you’re required to have good credit, it usually means you can’t have negative listings on your file. If you’re unsure, it’s best to ask the lender before you apply. Some lenders state on their website that they welcome applicants that have a bad credit history. They discuss the issues that have shown up on your credit file with you and look at your current income and financial standing to determine your creditworthiness. This may mean you can get approved, but you are likely to have a higher interest rate than someone with good or excellent credit history.
  • Find out the minimum income. Each lender will have a different minimum income requirement, and this minimum may change depending on the loan product you are considering. Even if you meet the minimum eligibility, you will need to prove that you have enough disposable income left over once your essential costs such as rent, utilities and food are paid for. If you don’t have enough money left over to meet the repayments, you won’t have a chance of getting approved. Write out a budget based on your weekly, fortnightly or monthly income with a list of all outgoings before applying. This will also come in handy when you complete your loan application.
  • Ensure your loan purpose is allowed. Check with the lender to see if your loan purpose is okay. Often a personal loan can be used for just about anything, such as paying for a holiday, renovating your home, medical costs or to consolidate debt. If you want to take out a secured personal loan there will be more restrictions, and if your loan purpose is for something that’s deemed risky, unethical or illegal, you will face problems in getting approval.
  • Verify your details. Double-check your details and information before you submit your application so the lender doesn’t need to ask for more information. Is your application filled out entirely? Have you provided all the correct information? If this is not complete, it may lead to your personal loan rejected. Lying on an application about your income, debts or employer will not work in your favour.
  • Check you meet the employment and income requirements? Do you need to have been in your role for a certain amount of time? Do you need to be receiving a regular income into your bank account? Check what the lender requires of your employment and ensure you meet it. They may want to contact your company to confirm your employment status, especially if you haven’t been in your role long, so let them know in advance to expect a call.
  • Don’t hold more loans than you can afford. In short, lenders want to lend you money. The main reason they won’t is if you have a number of loans already and they don’t think you can pay them back. You could look at consolidating your loans or paying back some of them before applying for a new one.
  • Check your collateral is sufficient. See what your lender requires regarding security and check that the asset you plan to use meets their requirements. If you are in doubt, get in touch with the lender before you apply.

Personal loan comparison

Now you know how to avoid your personal loan being rejected, check out the range of loans below. To find out more about a particular loan, click on ‘More Info’, or ‘Go to site’ to start an application. You can also compare the loan details side by side by clicking ‘Compare’ for two or more loan products.

Data updated regularly
Name Product Interest Rate (p.a.) Min. Loan Amount Max. Loan Amount Loan Term Monthly Service Fee Establishment Fee
The Lending People Personal Loan
6.99% - 26.99%
$2,000
$75,000
1 to 7 years
$0 - $10 depending on lender
$50 - $695 depending on lender
Eligibility: Be 18+, an NZ citizen or permanent resident, in employment and earning at least $500 per week.
Secured and unsecured loans of up to $75,000 from a variety of reputable lenders.
Max Loans Secured Personal Loan
6.99% - 29.95%
$1,000
$100,000
1 - 7 years
$0 to $10 depending on lender
$195 to $1,500 depending on lender
Eligibility: Be 18+, an NZ citizen/permanent resident, and have an income of least $400 per week.
Harmoney Unsecured Personal Loan
6.99% - 24.69%
$2,000
$70,000
3 or 5 years
$0
$200-$450 depending on loan size
Eligibility: Be a NZ resident/citizen and have a good credit score.
Apply for an unsecured personal loan up to $70,000 with no early repayment fees.
Kiwibank Unsecured Personal Loan
13.95% - 18.95%
$2,000
$70,000
6 months to 7 years
$0
$240, $0 for Graduate Pack customers
Eligibility: Be 18+, an NZ citizen/permanent resident, and have a stable income.
Unsecured personal loans starting at 13.95% p.a. for loans from $10,000. Loans between $2,000 and $9,999 have a rate of 18.95% p.a.
LoanSpot Secured Personal Loan
8.95% - 27.95%
$3,000
$75,000
12 - 60 months
$0 - $10 depending on lender
$195 - $695 depending on lender
Eligibility: Must be 18+, be an NZ citizen/permanent resident, and have an income of least $400 per week.
Secured personal loans from $3,000.
Better® Secured Personal Loan
6.95% - 23.95%
$3,000
$250,000
12-60 months
$0 - $10 depending on lender
$195 - $695, depending on the lender
Eligibility: Must be 18+, be an NZ citizen/permanent resident, and have an income of least $400 per week.
Secured personal loans from $3,000.
Gem Secured Low Rate Personal Loan
9.99%
$20,000
$70,000
6 months to 7 years
$0
$240
Eligibility: Be 18+, a permanent NZ resident and earning a stable income.
Secured, low-rate personal loans for those with an excellent credit history. Weekly, fortnightly or monthly repayment schedules and no fees for early repayment.
Lending Crowd Personal Loan
5.03% -19.30%
$2,000
$200,000
2, 3 or 5 years
$0
$200-$1,450 depending on the amount borrowed
Eligibility: Be an 18+ NZ permanent resident, have a good credit history and collateral/security.
Secured and unsecured personal loans from $2,000 to $200,000. 100% online with no paperwork or early repayment fees.
Max Loans Unsecured Personal Loan
6.99% - 29.95%
$1,000
$40,000
1 - 7 years
$0 to $10 depending on lender
$195 to $995 depending on lender
Eligibility: Be 18+, an NZ citizen/permanent resident, and have an income of least $400 per week.
Nectar Unsecured Personal Loan
8.95% - 29.95%
$1,000
$20,000
6 months to 4 years
$0
$240
Eligibility: Must be 18+, an NZ citizen or permanent resident, have an income of $400 per week or more (after tax) and a stable credit history.
Unsecured loans from $1,000 with payouts made within one day of approval. Applications entirely online.
Save My Bacon Unsecured Flex Loan
49.95%
$1,000
$5,000
8 - 52 weeks
$10
$95
Eligibility: Be 18 or over, have an income of at least $400 per week and be a NZ citizen, permanent resident or have a valid work visa.
Medium-term unsecured loans from $1,000 to $5,000 with no hidden fees.
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Compare up to 4 providers

Personal loan rejected? Here’s what to do

If you’ve already had a personal loan rejected, there are steps you can take to understand why and avoid it happening again in the future.

  • Avoid multiple applications. The first thing you’ll likely want to do when you get denied for a personal loan is to try again with another lender. When you apply for a loan, the creditor lists the application on your credit file. Numerous applications made in a short timespan can have a negative impact on your credit rating, especially if one or more of these is rejected.
  • Keep your record clean. You can achieve this by paying your debts on time and not defaulting on any payments that you are responsible for. Keep track of your financial obligations and don’t take on loans you can’t afford.
  • Pay off more of your existing debt. Lenders look at how much debt you currently have, so try reducing the amount as much as possible before you apply again. Even putting an extra $10 a week toward your credit card balance or car loan can help pay off your debts faster.
  • Reduce your current costs. Not having enough income left over once expenses are paid is a common personal loan rejection reason, so see if there is a way to reduce your monthly costs. Are there subscriptions for services like Sky, Netflix or a gym membership that you don’t really use?
  • Check your credit report. You should regularly monitor your credit file to ensure the information is up to date. There may be a small issue from a year ago that you forgot about and is affecting your credit score.

There is no set time frame that you need to wait before you can apply for a personal loan again, but you should make sure that you have made steps to improve your financial situation and your credit score. You can also consider asking someone to be a guarantor on your loan, but this person must feel confident that you have the ability to meet the terms on the loan agreement and make repayments on time.

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