William Mwangi

There are few experiences in one’s financial journey that are as frustrating as being rejected for a loan. Not only can it derail your dream to financially liberate yourself through a new business but it can also leave you in financial limbo with nowhere to turn. An important part of being able to bounce back from the disappointment involves learning from your mistakes and working to correct the situations that led to your rejection.

This takes time and patience but can be accomplished through a number of key steps.

Avoid reapplying too soon

If you dive back in immediately after getting rejected, without analyzing the causes of the bank’s decision, chances are high that your second application will be thrown in the bin once again. It is important to take time to settle down and strategize on a plan to turn around your fortunes. The lender is unlikely to change their mind if presented with the exact same financial record a second time. You should take time to polish up on your application. For example, if you were applying for a business loan, presenting a more realistic business plan could boost your chances.

Find out why the loan was denied

This is not a difficult task since under the Equal Credit Opportunity Act, lenders are required to disclose to loan applicants within 30 days the reason for such denial. There are numerous possible reasons for denial with low credit rating being the most common. Additional reasons may include insufficient income and applying for an amount that is too high. If the latter is the case, then the obvious answer is to consider reapplying for a lower amount that fits your income. The same law also allows unsuccessful loan applicants to appeal the lender’s decision if they feel that the reasons were discriminative.

Order your credit report

Your credit report is the most important indicator as to what could be behind your rejection. The credit report is the main document that your lender uses to appraise your ability to pay back their money. Banks rely on credit reporting companies such as Equifax, Experian and TransUnion which get information on your past borrowing and repayment records, analyze it and relay it to lenders. These companies provide borrowers with one free copy of their credit report annually. By requesting to see your credit report, you are able to see your credit score and draw a plan to repay your debt. Additionally, credit reports often contain errors which harm your credit worthiness and it is important to get these errors corrected.

Fix your credit

Your previous unpaid credit is undoubtedly part of the problem. The first step you take should involve paying off as much debt as you can. This will immediately raise your income-debt ratio and place you favorably in the bank’s appraisal. Raising your credit rating is a long term endeavor that takes consistent effort to make debt installments on time and to raise one’s income. Another strategy that improves your credit rating is your income. Although income is not very much in control of the borrower, a growth in income is one of the things that lenders look out for when appraising your credit worthiness.

Consider trying a different lender

Different lenders have varying stipulations and appraisal mechanisms, hence rejection by one bank does not automatically mean another bank would have rejected your application. Rather than applying repeatedly to the same lending institution, it is advisable to seek a second opinion with another bank, especially if you have already done your due diligence and ascertained that your financial information warranted approval. Lower lending institutions such as community banks and union banks are also more likely to approve loans to people whose credit scores would otherwise not qualify for consideration.

Apply again

Once you have corrected the flaws in your financial record that got you rejected the first time, you may try applying again to the lender. Consider additional measures to increase your eligibility such as attaching collateral, placing a down payment or getting a cosigner. These strategies give greater assurance to the lender of your ability to repay the loan. Additionally, the lender is likely to ease repayment terms by giving lower interest rates and longer repayment periods.


1. https://www.thebalance.com/loan-application-denied-4032776
2. https://www.finder.com/personal-loan-denial
3. https://www.streetdirectory.com/travel_guide/151655/debts_loans/5_steps_to_take_if_your_loan_is_denied.html

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