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What to Do When the Bank Refuse You a Loan

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It’s not a guarantee you will receive a loan you request from your bank. The rejection could be a bad experience, especially if the bank loan was your only or last financial solution.

In such a scenario, you need not panic. There’s always a second chance. The best thing to help your situation is to understand why the bank denied you the loan. By doing so, you’ll be able to identify the problems and rectify them. As a result, you’ll improve your approval chance next time you apply for one.

If you have been going through such an experience and wondering what to do, this article is for you. Continue reading to gain insight into what to do if you get refused a loan by the bank.

Here is what to do;

1. Identify and Understand the Reasons for the Rejection

When your loan does not go through, you may find yourself reapplying for another one, especially if you need the money and have no other options. But it will still be rejected if the reasons that caused the denial in your first attempt still exist.

That’s why it’s essential to know and understand why the bank denied you a loan before you try another time. That way, you will be able to rectify the problems that led to the loan rejection, thereby increasing your chance of approval the next time you apply for the loan.

There are various reasons a bank can refuse you a loan. Some examples include;

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• Unconfirmed, Insufficient, or None Income

Lenders approve loans based on various factors. What you earn is a significant determinant. If the amount you make cannot sustain the loan you’re requesting, the bank will deny you the loan.

It’s even worse when you don’t earn any income. How will you pay the loan? The bank views it as a considerable risk to lend to such a person.

Even though you have some income, the lender looks at other factors like what to do when you fail the loan. So it investigates whether you have security to stand in for the loan in case you default payment.

Therefore, the bank will look at your assets, investments, nature of business, etc., to determine whether its money is secured. If there’s nothing to stand in as security for the lender’s money, it may reject your loan.

• Poor Credit Rating

The bank will always check your credit history before offering you a loan. The purpose of this is to identify if you are a good borrower. If your credit score is low, you are not creditworthy.

Before applying for another loan, ensure you boost your credit rating by paying the defaulted loans and rectifying other factors that could have led to poor credit history.

• Application Errors

You may find your loan denied because of errors you made on the application form. For example;

• Submitting an incomplete form

• Spelling mistakes

• Submitting wrong information

• None matching signatures or other details

2. Fix the Causes that Led to the Loan Denial

When lenders deny you credit, they often present a Notice of Adverse Action to you. It is a document explaining why the bank rejected your loan request.

With insight into what caused your loan rejection, it’s time to turn things around. Start rectifying each problem and all the red flags. The following are excellent examples of how you can solve such problems;

• If the bank denied you the loan due to lack of collateral, provide one. If you don’t have any, try talking to a friend or family to help you use theirs.

Of course, there will have to be some agreement between you, the owner of the collateral, and the bank. Lenders offer loans quickly to persons with security for their money.

• If the lender denies you the loan because you do not have any income or it’s insufficient, find a guarantor. It could be someone from your family or a close friend. The person will sign to stand for you and repay the bank when you default. With such assurance, the bank will quickly approve your loan.

• Pay of your defaulted loans if they caused your loan denial. If you don’t have the money to pay them at once, agree with the lenders to allow you to start paying in instalments. When you apply for a loan, the bank will see that you have a loan elsewhere but are paying. In return, the bank’s confidence and trust to give you the loan increases.

• Avoid reapplying for a loan if you have not rectified the reasons that led to the denial of the previous application. It means that your loan request will always get rejected, posing a danger to your credit rating. If denied a loan, it affects your credit scores negatively. The more rejections you get, the more you lower your credit rating.

3. Look for Alternative Strategies and Try Out Other Lenders

The bank may deny you the loan, but it can reconsider its decision based on specific actions. So it would help if you thought of how you can affect your borrowing ability positively. Great examples include;

• If taking a loan for an asset like a car or house, make a substantial down payment. It means that you’ll borrow less than the last time. It also translates into lower monthly payments.

Also, when the amount borrowed is less than the value of the asset you want to buy, lenders don’t find it risky. The bank will be willing to give you the money in such a scenario.

• If a particular bank denies you a loan, don’t give up. Instead, try out another one. Financial institutions have their rules and regulations. What made a particular bank deny you a loan may not affect another bank. Also, lenders’ opinions differ.


When your bank rejects your loan application, it’s not the end of the world. Take actions like those discussed above to make yourself a better borrower before reapplying for another loan.

Some approaches may take less effort and a short time, but you’ll have to be patient with others. The best thing is that they work and help you qualify for your next loan application.

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