Why can’t I get a loan?

If you’ve recently applied for a loan but your application was refused, you’re probably wondering what went wrong. Being declined for a loan can be frustrating, especially when you’re facing an unexpected expense and you’re confident you’ll be able to make the repayments.

In this guide, we answer common questions on loan rejection, including: ‘Why can’t I get a loan anywhere?’ and ‘Are there ways to improve my chances of approval?’. To help you make an informed decision on whether a personal loan is right for you, we also explore some payday loan alternatives.

If you know your application was refused due to a poor credit history, we have a separate guide on whether you can get a payday loan with bad credit.

In this guide: 

• Why can’t I get a loan?
• What should I do if I’ve been refused a loan?
• How to improve your credit rating
• Alternatives to taking out a loan
• Final thoughts 
• Explore more helpful resources 

Why can’t I get a loan?

Most lenders consider loan applications from a variety of borrowers, including those with less-than-ideal credit histories. However, there are minimum requirements that need to be met, including being 18 or over, having a UK bank account, and being a UK citizen. 

In addition to this, responsible lenders carry out an in-depth assessment of your credit history, including reviewing your income, your current employment status, and any history of bankruptcy and CCJs. From this assessment, there are multiple reasons why applicants might be rejected, including:

• Failure to meet the lender’s requirements: Even if you meet the basic criteria, lenders carry out further affordability checks to ensure repayments will be manageable.
• A history of missed payments: Defaults, CCJs, or missed payments can negatively impact your credit score, making lenders less confident in your ability to repay.
• A limited credit history: If you haven’t borrowed before, lenders might find it difficult to determine your reliability.
• Incorrect application details: Something as small as a misspelled address can mean lenders are unable to confirm your identity.
• Insufficient or unstable income: If you have an excellent credit score but are refused a loan, this could be the reason.

Our guide on loan eligibility criteria dives deeper into this topic, exploring the main factors that impact acceptance.

What should I do if I’ve been refused a loan?

While being rejected for a loan can feel like you’re out of options, it’s important not to rush into making multiple applications with different lenders. Several applications in a short space of time can damage your credit score, making it even harder to borrow in the future. Instead, take some time to review your situation and understand the reasons behind the rejection.

If you’ve been refused a loan and are unsure why, checking your credit score is a good first step to understanding what lenders see when you apply. You can do this with one of the three main credit reference agencies: Experian, TransUnion, and Equifax. If you find that your score is less-than-ideal, it’s time to get to work on improving it.

How to improve your credit rating

If your credit score is currently limiting your borrowing options, there are small steps you can take to improve it. Here are our top tips for building a good credit score and expanding your borrowing opportunities:

1. Stay on top of payments: If you currently have existing debt, prioritise reducing it by staying on top of your repayment schedule. Late or missed payments can cause your score to dip, while consistency shows that you’re in control.
2. Register to vote: Registering to vote and ensuring you’re on the electoral roll means lenders can easily confirm your identity.
3. Limit applications: While it can be tempting to make multiple credit applications when you’re in need of quick cash, this can signal that you’re struggling.
4. Check for errors: Mistakes are common, but if you review your credit report, you’ll be able to correct them before they impact your score.
5. Build a positive credit history: If you can’t get a loan anywhere, it might be because you’re yet to build up a positive credit history. Consider taking out an alternative form of credit, then making timely payments to demonstrate reliability.

For more tips, see our full guide on how to improve your credit score.

Alternatives to taking out a loan

If you need a loan but you’ve been refused everywhere, it might be time to start exploring some payday loan alternatives. The following options might be better suited to your situation:

• Authorised overdrafts: If you need a small amount of cash to tide you over, consider contacting your bank about an overdraft. Just make sure you’re aware of the interest and fees, and that you have clear repayment plans in place.
• Guarantor loans: Guarantor loans are personal loans that are backed by someone who agrees to settle the debt if the borrower fails to do so. This reduces the level of risk to the lender.
• Borrowing from friends and family: If you’re looking to avoid taking out credit altogether, borrowing from a trusted friend or family member can be another option. Just make sure you set a clear repayment schedule to avoid any confusion or conflict.
• Emergency funds: Building up an emergency fund is a great way to ensure unexpected expenses are covered. Start small, saving little and often, then the next time a surprise cost pops up, you can dip into it instead of relying on credit.

Final thoughts

While loan rejection can be disappointing, there are a variety of ways to boost your credit score and expand your borrowing options in future. If you’ve been refused for loans everywhere, take some time to understand why, and then turn your attention to strengthening your position for future applications.

And don’t forget, if borrowing isn’t right for you right now, there are a variety of loan alternatives to explore too.

Explore more helpful resources

Looking for more insights? You’ll find plenty over on the Moneyboat blog. There you can read guides on how to prepare for a loan application and what you need to know before borrowing online.

Finally, if you’re worried about your next steps, or are looking for expert advice, there are various free and independent support organisations you can contact. These include:

• StepChange for free debt management advice
• Citizens Advice for support with money, employment, benefits and legal rights
• MoneyHelper who offer help and guidance on money and pensions

From government-backed resources to charities, there’s help available no matter your situation.