Why Your Online Loan Application May Have Failed

Why Your Online Loan Application May Have Failed

When your online loan application is rejected, it can be discouraging, especially when you really need the funds. Before you start applying for loans, it pays to be prepared. For many getting a loan can be an easy process, but there are all kinds of questions to ask yourself about your loan request.

Application Errors

One of the more common reasons your application might be rejected if you did not fill in the details properly. It could have been the address, postal code, or you may have entered incorrect information anywhere during the process. 

If you failed to provide any requested documents, this can also create an issue that can impact your chances of getting approved. Always take care to complete the details accurately. Leaving sections blank or unfinished can also affect the approval process. 

Debt Threshold

If you carry a large amount of debt, this can certainly impact your odds of being approved for any sort of a loan. This sends a red flag to lenders that you may have trouble making payments. 

Most lenders will look at your overall debt to income ratio (DTI) to help them with evaluating your application about what sort of risk you might be, and how likely they would be to see repayment. 

Most lenders prefer to see a DTI below 30 percent from borrowers, as this suggests you should be able to manage the payments. This would also depend on the amount and terms requested and how it might fit with what they see as expenditures that you need to cover already.

Poor Credit History

When applying for installment loans or personal loans, many lenders will look at your profile and credit score as they review your application. 

With personal loans, an online lender is usually looking for a good to very good credit score, such as 740 or better. Many banks might be looking for even higher scores. When looking to borrow, there are banks and online lenders, with the latter often being easier and faster to get approved with. Being prepared can help avoid borrowing mistakes you might make.

For installment loans, the lender is usually looking for a credit score rating of fair to good, which is at least 600 or better. Since not all lenders are the same, you may find that some might consider applications closer to 580 credit score, and some might even consider a little lower.

When referring to your credit report, it’s a bit of a judgment call by the lender. While a score might be acceptable, if they were to see derogatory remarks on your report that can also lead to a loan request being rejected. Errors on your credit report can also cause problems. If you are requested a loan and had a personal loan in the past but failed to get an NOC (No Objection Certificate) from the previous lender it may also affect a loan request.

RELATED: What Credit Score is Needed for an Online Loan 


Most lenders need to know your income when reviewing a loan request, and some want to know about how long you’ve lived in your current residence, along with how long you’ve been at your current job. These are all ways of evaluating the potential stability of an applicant. If you have been at a new job less than 3 months, most of the time your loan request would be denied. While you can’t always plan ahead when unexpected expenses occur, it can help you to know that if you recently changed employment, it could be more difficult to get approved. 

Even if you have a good credit score and none of the issues described above, your application can be rejected just by your location. When you live in an area that a bank or some lenders consider a negative zone or appear on a defaulter list then you might be disapproved, even if you did everything correctly.

RELATED: Benefits Of Good Credit and Why it Matters 

Insufficient Income

The amount you earn can also affect what you might be permitted to borrow. If you request a large amount and have a low income, lenders may consider you pose a risk and are unlikely to be able to afford the monthly payments. The amount you request can be an issue if the lender determines you probably can’t afford it. 

It is known that some which are desperate for quick cash will borrow from two lenders within minutes of each other, so it won’t be evident on their credit score or from IBV. This can be a recipe for future disaster that can send the individual into a debt spiral. While they are able to borrow more than they qualify for, they’ll be unable to make the payments, which are reported to the credit bureaus as a series of late payments and later a loan default. Recovering from this can take years to improve a credit score and limit borrowing options further, with worse choices and even higher interest rates for the lenders that might consider the application. For some this might seem like a good idea at the time and they’ll sort it out later, but for the most part, very few if any will recover from this move and it becomes an issue for a long time.

RELATED: Guide to Borrowing Money Online

The Basics

Sometimes a loan request can be denied because you didn’t meet some basic requirements. The more common basics of a loan request include being a resident of Canada, of legal age within the province you applied (often 18 or older) with an active Canadian bank account. 

Some lenders request to know the purpose for a loan, and there are a few reasons that this can also lead to rejection. For one, using the loan for investment purposes. The second might be for starting a business. Either are not permitted by many lenders as a reason to borrow.

Other Recommended Reading:


While there can be other reasons why a loan application might be denied, this covers many of the most common reasons for rejection. 



Making sense of finance one day at a time.