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Rejection is never a good feeling, and it can feel overwhelming when trying to secure a personal loan. It can be hard to know where to turn next and feel like you’re out of options. If you have been turned down for a loan, don’t assume it’s over. There are several things you should do after being refused.
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I have gathered my best tips for what to do when you get the big scary “no” from a lender.
1. Find out why you were denied
Taking the time to find out why your loan was denied can give you powerful insight into what needs to be improved so the next time you apply for a loan, you are more likely to be approved. There are so many reasons that you may have been denied a loan. Maybe your credit score was too low? Or your debt-to-income ratio didn’t meet their requirements? Whatever the reason, you have a right to know, and as long as you ask within 60 days, you are covered under the Equal Credit Opportunity Act, and the lender must tell you why you were denied.
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2. Check your credit report
Getting a copy of your credit report is the best way to see what might be preventing you from getting a personal loan. Once you know what’s on your credit report that is negatively impacting your credit score, you can begin fixing it, improving your credit score, and therefore your chances of getting a loan.
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3. Ask the lender for a smaller loan
If your credit is good, your income is stable, and making the payments is not a problem, then it might be that you simply asked for too much money. Lenders consider your debt-to-income ratio, and if they feel a loan will stretch your income too thin, it could cause rejection. Instead apply for smaller loans that lenders feel more comfortable giving.
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4. Shop around
Not all lenders use the same criteria when it comes to how they approve or reject loans. Shop around and research what factors a lender considers when approving loans. It may not matter to one lender how long you have been at your job, whereas another lender may consider it a deal breaker if you have been with your current job less than a year.
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5. Find a Co-signer
You may not want to ask someone to co-sign for a loan for you but it may just be the solution you need. Lenders like co-signers since they reduce the risk of you defaulting on your loan because if you do, there is someone else who will make the payments. Using a co-signer can even result in a lower interest rate and reduced fees, which will help you pay back the loan faster and may improve your credit. These factors can then increase your chances of being approved for future loans without a co-signer.
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Final Thoughts
Being turned down for a loan can be disappointing, but it’s only a temporary setback and doesn’t mean you won’t get the loan you need. Taking a proactive approach to discover why you were turned down, address the problems, and reach out to other lenders are all great ways to move forward after a disappointing no.
