Why was my personal loan declined?
Why was my personal loan declined? Personal loans can be declined for myriad reasons. The most common ones I see are:
|Reasons your personal loan may have been declined:|
|Poor credit score.|
|Poor account conduct.|
|Insufficient time in your current job.|
The most common cause of a personal loan being declined in my experience is a lack of income. Whilst the online calculator may say you have enough income, or your own calculations may say so, each lender calculates affordability (serviceability) differently. Some lenders will use a verbal check with your employer, most will use the YTD figure on your payslip and turn it into a net monthly figure. The more difficult part is correctly calculating your expenses. 'Monthly Living Expenses' are different from lender to lender, where one lender may use a minimum figure of $1,244, another may use $1,350. Also, if you have a partner, some lenders will factor in you paying for their living expenses, some will factor you paying 70% of this, and others will chop it in half. There are so many factors when calculating serviceability it's highly recommended you talk to a Personal Loan Broker about your situation.
Poor Credit Score.
Poor credit scores are relatively common, and will often result in a declined personal loan application. Different lenders have different cut-offs and expectations. Whilst all lenders will take into account each applications merits, all also have a standard cut-off score where the application will be automatically declined. Most lenders use your VEDA 1.1 score (from Equifax) and many lenders will decline an application where the 1.1 score is less than 500, or 475 in some cases, or 400. Different lenders have different policies when looking at defaults, some will accept small paid defaults, some will not. Most lenders also have automatic decline policies where there are applications to 'payday lenders' showing on your credit file.
Poor Account Conduct.
In many cases, the lender will want to see 90 days' bank statement on your main bank account and/or any existing loans. If they see poor conduct on these accounts (most lenders auto-decline loans if they see 3 or more overdrawns/failed direct debits), your loan is likely to be declined.
Insufficient time in your job.
It's important to keep in mind that lenders all have a policy regarding the minimum time you must have been in your current position. If you are casual, the lowest time any lenders on our panel accept is 6 months, although most are 12 months. If you are full time, we have a lender that accepts 1 day employment, but most require 6 months. If you are self-employed, most lenders require 2 years, although there are options for 1 year ABN's. It's important to check the lender's policy on 'time-in-job' prior to applying and wondering why your personal loan was declined.
What can I do once my personal loan has been declined?
People often come to me after having a loan declined, usually with no idea why it happened. There are, in many cases, other options available for these people if they know which lenders are likely to accept their application. Please don't ruin your credit score by applying to all the lenders, as you will get repeated declines as your credit score goes down (it decreases with each application), I would highly recommend you talk to a Personal Loan Broker to find out if you have any viable options. We are happy to assist you in this. Our fee is only charged once the loan is approved and is added onto your loan, so we can help improve your chance of approval with no upfront costs to yourself.