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7 Ways to Bounce Back from a Rejected Personal Loan

If you've been rejected for a personal loan, don't take it personally. While you may find it surprising, in 2020 alone, 21 percent of Americans were rejected for a personal loan due to low credit scores. So how can you recover from this event and come back stronger?

Here are seven excellent ways to deal with a rejected personal loan application.

1. Check Your Decline Notice

Like any setback in life, the best thing to do is find out why you were set back in the first place. Any lender that doles out a rejected loan is obligated by law to give you an adverse action letter outlining the exact reasons for your rejection.

If you were denied because of something on your credit report, you'd have your first clue on what to work on. As a rule, you're entitled to a free copy of your credit report after getting rejected.

2. Confirm the Accuracy of Your Credit Report

Examine your credit report once you've determined the cause for your rejection. If you find financial hiccups, such as late or unpaid payments, you'll need to deal with this promptly to improve your prospects on your next loan.

Also, examine your credit report to confirm that each account stated belongs to you and that the information is valid. If you find any invalid data, you can dispute this with the issuing credit bureau or hire professionals to do it for you.

3. Work on Your Credit Score

From this point, your goal should be to improve your required qualifications from a financial standpoint. A low credit score is one of the most common reasons for personal loan rejection. This is because most lenders use credit scores to assess your risk as a borrower. FICO is a popular rating system used by lenders, with scores ranging from 300 to 850.

Applicants with solid credit (at least 670) are more likely to be accepted, whereas those with bad credit may be turned down. Improve your credit score by paying off any current obligations as soon as possible, maintaining your credit utilization percentage under 30 percent, and delete any inaccurate information from your credit report.

4. Reduce Your Debt-to-Income (DTI) Ratio

If your DTI ratio is too high, lenders may reject your loan application. This figure is used to determine your capacity to repay the new loan while simultaneously managing your existing debt. Lenders usually prefer 36 percent or less; however, some lenders may approve highly qualified persons with ratios as high as 50 percent.

Divide your current monthly debt load by your monthly gross income to calculate your DTI. For example, if your monthly debt is $3,000 and your monthly gross income is $4,000, your DTI ratio is 75 percent ($3000 / $4,000).

5. Apply With a Co-Signer

If you don't have a consistent source of income, have had some financial setbacks, or are still working on creating a solid credit history, applying with someone else may help you be accepted. Applying with a co-signer or co-borrower may result in a better loan, such as a lower interest rate, a more significant loan amount, or both.

6. Compare Lenders

Lenders may not all use the same lending criteria or have the same loan limits. Rates, fees, and durations might also vary substantially amongst lenders.

By shopping around and evaluating different loan offers, you may save hundreds, if not thousands, of dollars over the life of your loan. If you get rejected from one lender, someone with different or lower criteria might consider your application more favorably.

7. Apply for a Lower Amount

Lenders may reject your loan application if you want more money than they deem you can afford to repay. If this is the case, request a lower amount.


As previously said, don't fret too much about rejected personal loans. Sometimes, you're just an inch shy from getting that approval stamp. Following these approaches will progressively shape you into a better loan candidate, increasing your chances of acceptance in the future.

Gadsden Finance is a loan company in Gadsden, AL that offers a wide range of personal loan sizes with a transparent fee structure. Your financial wellness is our utmost priority. Get in touch with us today so we can discuss a personal loan that fits your needs!

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