What Does It Mean If Your Loan Application Gets Denied?

Sometimes, you submit a loan application, and it just doesn’t push through. At this point, you may be wondering what a denied loan means for future applications and the various aspects of your financial status.

There are a number of factors that need to be established, and knowing them can enlighten you, so you fare better next time you’re looking for installment loans online.

If You Get Denied, It Won’t Hurt Your Credit Score

The first thing you should keep in mind is that getting denied a loan will not cause your credit score to get worse. That may seem like a small comfort when you’re in a tough spot financially, but at least you are not setting yourself up for further challenges down the line.

It should be noted, however, that you do lose a couple of points every time a hard credit inquiry is made. That said, this isn’t a huge dink that will have a drastic impact. In any case, your score will eventually revert in a few months to a couple of years.

You May Need to Check Your Income and DTI Ratio

Even if you’re just looking at small personal loans, you’ll need to have a stable employment history, steady income, and a DTI ratio that falls in the range of 20% to 35%. Lenders want to make sure that any applicants have the means to pay back their loans. So, they will look at two factors: income level and debt-to-income (DTI) ratio.

Though many lenders won’t give specific income requirements, they can still deny an application if your income stream is deemed too low for the amount you’re borrowing.

They can also deny you if your DTI ratio is not well-balanced. If you go beyond 40%, this means a significant chunk of your income already goes to paying off debts. Lenders may find that too high and conclude that you can’t feasibly pay back an additional loan.

High-Risk Spots on Your Credit History Will Hurt Approval

This may seem obvious, but you won’t get approved for your loan if you have any unpaid or delinquent accounts. Lenders will also be looking at your credit history for any foreclosures, bankruptcy, and high balance on credit cards, and the number of inquiries done in the past.

They do this to check your level of risk and will use it as a basis on whether or not to approve your loan. You should note that this doesn’t bar you from future loans, and lenders will usually let you know if this is the reason you are getting denied.

Getting Denied Does Not Bar You From Future Loans

As mentioned above, if you get denied a loan application, this does not mean you will never be able to secure another loan in the future. This simply means that you need to start working on remedying the factors that led to your denial in the first place.

Start paying off your high-interest debts, and this will already do wonders in improving your credit score and report.


There are a lot of factors that contribute to your loan application getting denied. The denial itself also carries certain implications, but it’s not necessarily a bleak forecast. If you find yourself in this scenario, keep working to improve your financial standing and find the right lender for your needs.

At Mid-Town Loans, we understand the time-sensitive need for help when you’re short on funds. Contact us to learn about our ,installment loans in Decherd, TN.