Why was I declined for a loan request?

Created by Cyril S, Modified on Fri, Feb 2, 2024 at 7:11 AM by Cyril S

There are many factors that can go into a loan request not being matched with a potential lender. Here are 3 reasons why your request for a loan might have been declined from one of our lenders:

Credit Score
Debt-to-Income Ratio
Amount Requested

Credit Score

When a lender views your personal loan application, they commonly consider your FICO credit score, among other factors like your income. Your credit score tells lenders how good you may be at managing money. Factors like your payment history and amount owed are heavily weighed in your credit score.

Lenders commonly publish their minimum credit requirements. If you fall below a lender’s minimum, you’ll likely struggle to qualify for a loan from them. Even if you’re approved for a loan with a low credit score, lenders will charge you a higher rate to compensate for the risk of you not being able to repay the loan.

Debt-to-Income Ratio

Another problem you may have is a DTI ratio that’s too high. This ratio compares your monthly debt total with your monthly gross income. For example, if your monthly debt payments are $3,000 and you divide that by your monthly income of $5,000, then your DTI ratio would be 60%. A high ratio such as this could signal to lenders that you might struggle to afford debt repayment.

For that reason, it’s best to aim for a DTI ratio of 35% or less, which is considered good. That way you’d increase your chances of loan approval.

Amount Requested

If you try to borrow more than you can afford to pay back, a lender may deny your request for a personal loan. This is because the amount the lender approves you for is based on your income and other debt obligations. After reviewing your finances, the lender may decide you don’t qualify to borrow a certain amount.

For example, let’s say you try to take out a personal loan for $100,000, knowing that you don’t earn enough income to afford the monthly loan repayment. Since you’re requesting an unrealistic amount, the lender will most certainly deny you.