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: |
|---|
| Insufficient income. |
| Poor credit score. |
| Poor account conduct. |
| Insufficient time in your current job. |
If your personal loan has been declined and you want a second opinion, please contact our Personal Loan Broker.
Insufficient income
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.
Lenders can calculate income & expenses very differently, which can work against you. You can also use this information to find a lender that will approve your loan.
| Different ways lenders will calculate income: |
|---|
| Most lenders will use NET salary credits to your bank account, averaged over 90 days. |
| Some lenders will use 180 days' salary credits. |
| Some lenders will use net YTD on your pasyslip. |
| For Centrelink income, different lenders will accept different figures. |
| Different expense calculations lenders will use: |
|---|
| Living expenses: all lenders have different minimum living expenses for affordability purposes. |
| Including your partner's income: some will use $0, others will use their actual income (without adding them as an applicant), others will split in 50/50 without evidence. |
| Rent/board: even if paying $0, most lenders will use $650p.m. as a minimum figure. |
We can help you figure out which lender will give you the most generous affordability calculations in your circumstances. Whilst not always, this can give you approval options where you've been declined elsewhere.
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 for your credit file. You should always use your Equifax Score as most lenders will use this exclusively.
Reasons your credit history may be insufficient:
| Reasons your credit history may get your personal loan declined: |
|---|
| An Equifax score below 550 will get you declined with a lot of lenders. |
| Any default on your credit file. |
| A previous bankruptcy will get you declined from certain lenders. Even if it's not on your credit file, some lenders check the Insolvency Register for past bankruptcies. |
| If your credit file is less than 12 months old. |
| Missed payments on your credit file. |
| Financial hardship on your credit file. |
| One or more payday loans showing. |
We can usually assist clients in finding a lender to approve their loan in the following circumstances:
- Credit score must be above 400 in all cases. For loans over $15,000, we'll need a credit score over about 550.
- We can accept one small default. It must be paid over 2 years ago and under $300.
- We need any missed payments to be rectified and over 1 month old.
- Previous bankruptcies aren't an issue if they're not on the credit file, and disclosed to us upfront.
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.
| Reasons your bank statement conduct may get you declined: |
|---|
| More than 2 failed direct debits or overdrawns. |
| Any debt collection activity. |
| Excessive gambling or cash withdrawals. |
| Payday loans or wage-advance type facilities. |
| Undisclosed liabilities. |
Some lenders will accept different amounts of 'poor conduct', and some lenders won't need to see bank statements. There may be options depending on the reason for the decline.
Insufficient time in your job.
Each lender has a minimum time-in-job requirement. The following are acceptable to our lenders (but perhaps not to the lender you applied with):
| Acceptable time in job with our lenders: |
|---|
| Permanent without probation: We just need your 1st payslip. |
| Permanent with probation: if you're in a similar role/industry to your previous role and had a gap less than 28 days, we just need your first payslip. Otherwise, we need 3 months in job. |
| Casual: 4 months' minimum, 6-12 months with most lender.. |
| Under an ABN: 12 months with some lenders, 24 months with most.. |
What can I do once my personal loan has been declined?
Talking to us is the easiest way. We can't help in all situations, but we can give you a good shot. We can at least tell you the reason for the decline. We can generally assist if:
- Credit score over 550. 400-550 accepted in some instances.
- No unpaid defaults or paid defaults over $300.
- Sufficient income to cover current expenses + the new loan.
Zak AveryOwnerMortgage Broker
About the Author
Zak has been a Mortgage Broker since 2015, and founded Blue Fox Finance in February 2017. He has all industry memberships, qualifications, insurances and has received over 100 5-star Google reviews.