Common Reasons Your Personal Loan May Get Declined

Small personal loans can be very helpful when you’re in need of financial assistance, or you’re in a tight spot. That said, you won’t always be guaranteed approval. There are a number of factors that will result in a declined loan application, and knowing these may help you to figure out what you can do next time you apply.

Poor Credit Score

To begin with, if you have a low credit score, you may have difficulty getting a personal loan. This will be especially true if the loan you are applying for involves a high level of risk because lenders will want to keep a certain amount of security ready. You may find yourself being offered a loan at a higher interest rate or that has a higher set of fees if you have low credit.

If you’re denied a loan, you may have to consider alternative options to get the sort of loan you need. You can also work on building your credit score before you try to get a loan. Pay your credit card debts and pay your existing debts on time to improve your score.

Too Many Loans

One factor that will be taken into account when you apply is how many loans you already have. If you have too many loans, you may not be approved because the lender will want to ensure they don’t make too much of a risk. They will consider how capable you are of taking on any more debt, especially in terms of your financial status.

You may run into this issue more if you’re taking out a bigger loan. When you have so many loans to pay back, you may have a problem paying them off, so the lender is less likely to approve your application.

Consolidate your debts and focus on paying off your existing loans with the highest interest rates.

Loan Amount Too High

Of course, the amount of your loan is also important. Your lender will want to work out the amount they are willing to give you, and this will be based on how much they think you can afford to pay back.

You’ll run into this problem most when trying to get unrealistic amounts from installment loans online. The system will already check these flags to see if you are requesting a feasible amount that you can pay back accordingly.

Bad Debt-to-Income Ratio

Your debt-to-income (DTI) ratio is also a factor that will influence whether you get approved or not. Many lenders will want to see how much monthly gross income you receive and the percentage of this that will go into paying back your debts.

Generally speaking, any DTI ratio of 50% and above is considered bad. If your ratio is too high, you may have trouble getting a loan approved.

To remedy this, pay down big debts that cut into your monthly gross and try to find other means of padding up your income.


When you’re trying to get a personal loan to pay for your various needs, it can help to know why you were denied so you can tackle the issue and improve your chances of being approved next time. If you’re still having trouble, browse through your various credit options and consider what will work best for you.

Reach out to Mid-Town Loans to get ,installment loans in Decherd, TN. We understand the time-sensitive need for help when you’re short on funds, so contact us if you’re in a bind and apply for a loan.