How to avoid your personal loan being rejected

Rates and fees last updated on

What you need to do to get your personal loan application across the line.

There's no way of knowing whether you'll be approved for a personal loan. Not only that, but every rejected personal loan application is listed on your credit file. Receive just one rejection and the next lender may see this as a red flag, which may be enough to reject you again. Herein lies a big obstacle.

There's no trick to being approved for a personal loan, but there are some little-known ways that you can avoid the rejection pile. Read on to find out how you can avoid your personal loan being rejected.

The most common reasons personal loans aren't approved

  • You have bad credit history. While "bad credit" is usually pooled into one, there are varying levels of bad credit. For example, you may have never defaulted on any loans or credit cards but you might have applied for five loans in the past two months. Check your credit score to see where you stand before applying (it's free with finder).
  • Insufficient income. The lender can’t approve your application if they find that your income won’t sustain your monthly repayments. Lenders usually have a minimum income you need to earn in order to be eligible for the loan, so check if there is one set. If not, work out what repayments you will need to make and if these will be manageable on your income.
  • Dubious loan purpose. Check that you're able to finance what you need to with the loan you're applying for. Many loans come with restrictions as to how the funds can be used. For example, secured loans can only be secured by certain assets and car loans usually have an age restriction on the vehicle your purchasing. Also, if your lender finds out that your loan purpose isn’t credible, your chances of loan rejection are quite high.
  • Incorrect details. Lenders will usually verify the details you put in your application and if they find inconsistencies they may reject you.
  • Unstable employment or insufficient employment history. Lenders are very meticulous about the stability of your job. Quite a number of lenders insist that you should have a stable job and should be out of your probation period otherwise they will reject your loan. Probation period times differ, but lenders usually require three months of payslips or six months for casual employees.
  • You hold too many loans. If you’re currently holding several loans this could give a lender cause to reject you.
  • Low value of secured assets. Lots of lenders have restrictions on the type of asset you can use as collateral for a secured loan, so if your asset doesn’t meet these requirements your loan could be rejected.

How to avoid your personal loan being rejected

You’ve seen the reasons your personal loan may be rejected, so how do you avoid these?

  • Check the credit requirements. You should check what credit rating your lender requires for its lending requirements, and then see if you meet them. If you're required to have good credit, it usually means no negative listings on your file. If you’re unsure, it’s best to ask the lender before you apply. The majority of lenders have online chat services that can offer assistance. As mentioned, check your credit score for free with finder to get an idea of your credit position.
  • Find out the minimum income. Each lender will have a different minimum income requirement, and this minimum may also change depending on the loan product you’re looking at. The minimum income is listed on review pages, so you can confirm this before you apply.
  • Ensure your loan purpose is allowed. Check with the lender to see if your loan purpose is okay. If you are taking out a secured personal loan there will be more restrictions, although you may also find limitations for other types of loans.
  • Verify your details. Double-check your details and information before you submit your application so that the lender has no reason to reject your application. Is your application filled out entirely? Have you provided any incorrect information? Any of these can lead to rejected applications.
  • Check you meet the employment requirements. Do you need to have been in your role for a certain amount of time? Do you need to be receiving a regular income into your bank account? See what the lender requires of your employment and ensure you meet that.
  • Don’t hold more loans than you can afford. In short, lenders want to be able to lend you money. The main reason they won’t lend to you if you have a number of loans already is they don’t think you’ll be able to pay it back. You could look at consolidating your loans or paying back some of them back before applying for any new ones.
  • Check your collateral is sufficient. See what your lender requires in terms of collateral and check that the asset you plan to use meets their requirements. If you’re in doubt, get in touch with the lender before you apply.

Related Reading: How much should you borrow for your car loan?

Personal loan comparison

Now that you know what to look for when comparing personal loans, compare a range of loans below. Once you have compared, you can continue reading to find out what not to do.

Rates last updated October 17th, 2017
Name Product Interest Rate (p.a.) Comparison Rate (p.a.) Min Loan Amount Loan Term Monthly Service Fee Application Fee Monthly Repayment Product Description
RateSetter Personal Loan
From 8.66% (fixed)
0.5 to 5 years
$0 (Upfront fee $250 for loan terms of 2 years and above)
RateSetter offers personalised interest rates ranging from 3.7% p.a. to 9.6%.p.a. determined by your risk profile.
Westpac Unsecured Personal Loan
From 12.99% (fixed)
1 to 7 years
$0 (On new loan applications before 7th December 2017)
Borrow up to $50,000 for a term of up to 7 years with the unsecured Loan from Westpac
Citi Personal Loan Plus
From 9.99% (variable)
3 to 5 years
Borrow up to $75,000 to use for a range of purposes. Competitive rate of 9.99% p.a. available to all approved applicants.
SocietyOne Unsecured Personal Loan
From 7.5% (fixed)
2 to 5 years
3% (of loan amount)
Based on your risk profile, you will receive a tailored rate between 7.5% and 20.14% with a SocietyOne personal loan.
Pepper Money Unsecured Fixed Rate Personal Loan
From 9.99% (fixed)
1 to 7 years
Apply for up to $50,000 and receive conditional approval within minutes.
Bank Australia Lifestyle Personal Loan
From 11.89% (variable)
1 to 10 years
A competitive variable rate loan that gives you ten years to repay.
DirectMoney Unsecured Personal Loan
From 8.5% (fixed)
3 to 5 years
This unsecured loan features tiers of interest rates from 8.5% p.a. to 19.95% p.a. based on your credit history.
NOW FINANCE Personal Loans
From 8.95% (fixed)
1.5 to 7 years
$395 (Based on $10,000)
Get rewarded with a low interest rate for your good credit history. Rates from 8.95% p.a. to 16.95% p.a. depending on your credit score.
RateSetter 2-Year Personal Loan
From 4.69% (variable)
2 years
$0 (Upfront fee $250 for loan terms of 2 years and above)
This peer-to-peer loan is only available for a 2-year term at the rate of 4.69% p.a.
RACQ Unsecured Personal Loan
From 12.95% (variable)
5 years
Apply for up to $30,000 to use for a variety of purposes end enjoy no penalty for early repayment. Note: You must be a QLD resident to apply.
St.George Unsecured Personal Loan - Fixed Rate
From 12.99% (fixed)
1 to 5 years
Convenient redraw facility, flexible personal loan repayment options with competitive interest rate.
Latitude Personal Loans (Unsecured)
From 13.99% (fixed)
2 to 7 years
$250 (Loans under $4000 - $140)
An unsecured loan designed for multiple purposes – renovating, buying a car or travelling. Funds can be in your account in as little as 24 hours.
BankSA Unsecured Fixed Rate Personal Loan
From 14.06% (fixed)
1 to 5 years
Take advantage of a competitive fixed rate and no application fee for a limited time.
Bank of Melbourne Unsecured Variable Rate Personal Loan
From 12.99% (variable)
1 to 7 years
An unsecured personal loan that gives you a choice between a fixed or variable rate.

Compare up to 4 providers

Things to consider when applying

  • Avoid multiple applications. When you apply for a loan the creditor will list it on your credit file. Too many applications in a short space of time can have a negative impact on your credit rating.
  • Keep your record clean. You can make this happen by paying your debts on time and to defaulting on any loans. Keep track of your financials and don’t take on loans that you can’t handle to avoid defaults.
  • Check your credit report. You should keep monitoring your credit file and ensure the information is up to date. You need to take out outdated data, erroneous entry and other irrelevant information.


Picture: Shutterstock

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