Loan Rejection: Why You Were Denied and What to Do After

A young Asian businessman looks shocked as he holds a letter and an envelope in front of his open laptop. He may be worrying about loan rejection.

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It is one thing to be already stuck in a financially tight situation; it is another to go through an unsuccessful loan application. A loan rejection can be disheartening, as it may feel like the end of the road for you. What seemed like a definite solution at first turned out to be another slump, leaving you uncertain about what to do next. 

Although there are many other loan products you can also opt for, it is crucial to know why your initial loan application was rejected to see what went wrong.  

Knowing the reasons for your loan application’s rejection can help prevent you from encountering it again and teach you to be more financially responsible in the future. 

6 Reasons You Were Denied a Loan and What to Do After 

1. Insufficient income for the loan

Regardless of how much money is in your bank account, banks and lending companies will reject your loan application if you have insufficient income to sustain your monthly loan payment. Banks and lending companies always require borrowers to meet a minimum annual or monthly income requirement, also known as Capacity to Pay.

What to do:

Before even signing the application form, it is important to check the lender’s minimum income requirement where you filed your loan application. 

You should also review the requirements before applying to see if your income documents match the loan company’s criteria. Consulting with a reliable loan consultant will also help you determine the best allowable loan amount. Asialink Finance’s accredited loan consultants are available all over the Philippines and are always ready to help you. 

Additionally, knowing some loan myths may also help you avoid being misinformed and falling into tricky situations. 

Young Asian salesman greeting a couple at a car dealership
Image by Dragon Images from Shutterstock

2. Large car loan requests 

The thought of buying your dream car is truly an exciting one, but you might want to hold that off first. This is because banks do not offer unlimited loan amount offers. In relation, most banks permit car loans that range between Php 300,00 – Php 1,000,000. 

If the amount you wish to loan is limited by your income and the price of the car you intend to purchase, you might want to do research on other options and continue saving up until you can acquire your dream car. 

What to do: 

A car is a major investment, which takes time to pay off. Prior to purchasing one, consider your funds, budget, and auto loan features. 

Consider what you can afford when paying amortization dues and monthly interest. Most importantly, look for a car you need first instead of what you want. 

It also pays to know the various features and details of an auto loan so that the decision-making process is made easier, especially if you are a first-time buyer or just looking for second-hand car loan options.

3. A lack of capital to meet loan repayments 

Capital is vital to running a business and keeping it afloat. If you are a business owner and need extra capital, a lender may reject your loan application if you do not have ample cash flow to meet loan repayments. 

Lenders need to see that you have an organized business plan stating how you will generate income and make regular payments. Lenders will most likely cancel your loan application if you do not meet these requirements. 

What to do:

When you lack the capital to meet loan repayments, the first thing you should do is take a look at your finances. If you’re having trouble keeping up with your payments, there’s probably a reason for that. It may be that you’ve been spending more than you earn, or it may be that the interest rate on your loan is too high for your income. Either way, if you don’t understand the root cause of your problem, it’s going to be hard for anyone else to help you fix it.

A stressed young Asian couple is looking at their finances and bills.
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4. Not enough collateral to offer

Collaterals are assets (e.g., cash, earnings, equipment, cars, trucks) pledged for your loan’s duration to reduce the lender’s risk. The loan type and lender determine the collateral type required for your business to obtain a loan. 

Lenders can reject your loan application if you cannot provide them with sufficient collateral. 

What to do: 

Understand the details of the loan you intend to apply for to know what to expect from the collateral loan. Also, make sure to apply for a loan that meets your needs without the risk of pledging assets you can’t lose. 

5. Poor credit score

A credit score is any number from 300 to 850 indicating creditworthiness. Having higher credit scores is better because this gives borrowers greater chances to secure a loan approval from lenders. However, poor credit scores make it harder to apply for loans, which is attributed to factors such as bad borrowing habits and paying bills past their due date.  

What to do: 

Raise your credit score by following good practices such as reducing the current debt you are paying off, setting up automatic payments for your bills to avoid missing dates, and keeping your credit card balances low. 

A woman sitting on the floor with a calculator and sheets of financial papers. She may be worrying about her loan rejection.
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6. Swimming in debt because of too many loans 

Discipline is key to managing your expenses well. Committing to too many loans makes it harder to manage your money, as this leads to more money shelled out than what you are already spending. As a result, your payments also become delayed and grow bigger due to the interest rates charged.

What to do: 

Pre-close one loan at a time to lessen your debt. Focusing on pre-closing accounts with the highest interest rates gets the bigger bulk of your debt out of the way, making paying for the remaining debt more manageable. 

Turning Rejections into Opportunities with the Right Partner

Loan rejections are difficult to deal with. They can be discouraging but should not be viewed as personal failures. They do not mean that you cannot handle money well; it is just a matter of making financial adjustments to meet certain criteria and finding the right partner.

Asialink Finance Corporation is one of the Philippines’ fastest-growing finance companies, offering you a wide selection of convenient and accessible loans with competitive interest rates. We make your personal needs our greatest priority by providing you with fast and easy financing services! 

Looking to get your dream car or grow your business? Check out our loans and apply now!

Gab Doromal