Why can’t I get a loan?

Why you may be unable to get a loan

• You have a bad credit rating or poor credit history – How you’ve handled money in the past influences what credit you’ll be approved for now and in the future. We’ve looked into what this means here, in our guide to bad credit.
• You may not have any credit history – Never having officially borrowed money may not go in your favour if you’re looking to borrow now. Lenders look for evidence that you can borrow money and pay it back on time when they assess your application. If you’ve never borrowed money before, they have nothing to go on.
• You may have made too many applications – Lenders are wary of potential customers who have applied for a number of credit products over a short space of time, especially if they’ve been refused so far.
• You may have existing high levels of debt – If you’re already repaying a few loans, or have credit cards close to being maxed out, lenders may think you’re already over-committed. You may need to take some time to work on repaying your existing commitments before lenders will accept you for a new loan.

There may be a bad credit marker on your report – Defaults, missed payments, IVAs, or CCJs will affect your ability to get credit.

What should I do if I can’t get a loan?

• Find out why the lender refused your application
• Do not apply for any further credit
• Review your credit report and try to improve your credit rating
• Seek free advice from a not-for-profit service
• Consider alternative borrowing options, if you still need the money

Read over the lender’s reasons for refusing you

When you’re declined for credit, the lender should tell you whether their reason for declining your application was based on the information in your credit file or not. If it is because of this information, they should tell you which Credit Reference Agency, or Agencies in some cases, they used to make their decision.

They give you this information so that you can go away and take a look at your credit report for yourself to better understand your personal situation and their decision.

Stop applying for credit

Once you’ve been declined by one lender, it’s important that you don’t keep applying to others. While some lenders may use a Soft Search to  let you check how likely you are to be approved with them before you apply, most require you to submit the application before you know if you’ve been accepted or not.

When you submit an application this will usually register a search marker on your credit file. The more searches you have on your credit file, without a new credit account being opened, the more likely the next lenders you apply will be to decline your application.

Speak to an expert about your situation

If you’ve been refused a loan, because you have large amounts of problem debt or you’re applying for credit to cover the cost of another debt, then you may find it helpful to seek free and impartial debt advice from a not-for-profit service.

The Citizens Advice Bureau, Money Helper and The National Debtline are all experts that can offer you advice and guidance about debt and money worries. They can point you in the right direction when it comes to tackling large amounts of debt and improving your financial situation.

Look at your current credit rating and how you can improve it

Get a copy of your credit report – Credit Karma or Clearscore offer this for free – and carefully look through the information listed on there. You should be able to see details of your payments for the past six years, as well as personal details, the credit and other financial products you have in your name and what, if any, negative issues you’ve incurred that the lender will have considered when making a decision to give you a loan.

It will also show if you have missed payments or have defaulted on accounts. It is therefore important to make sure all the personal details and payment information presented about you on these your reports are correct. You want to make sure there are no credit products you don’t recognise or errors showing.

If you spot any errors, get in touch with the lender they are linked to, and the Credit Reference Agency you are using. If your credit rating is bad, take a look at our guide on how to fix bad credit.

Look into alternatives to borrowing

If you are unable to get a loan, there are other options available. Here, we’ve rounded up a few to consider:

Credit Union

More of these are now springing up around the country. Credit unions are set up as not-for-profit organisations and managed by people in the local community. To borrow from one, you will need to meet a number of criteria, but their capped interest rates can make them a manageable way to borrow.

The Money Helper has a great guide on how to borrow from a credit union and what you need to do to qualify for one.

Budgeting loans

A budgeting loan is an interest-free way to help cover certain costs, such as expenses linked to getting a new job, replacing essential white goods, or funeral costs. These are only available to those in receipt of benefits like Income Support, Jobseeker’s Allowance and Pension Credit, and you will still need to apply.

Such a loan could be a good option if you are trying to avoid doorstep lenders or high-interest loans. Read more about this option here.

Friends or family

Chat with someone close to you, who may be able to lend you the money you need. There won’t be any interest or late payment fees to worry about, and if they understand your situation they may be able to help if you struggle to repay at any point.

However, this solution should only be considered if you have a very strong, trusting relationship with one another.

Sell non-essential items

One man’s trash is another man’s treasure, so you may be able to gather the funds you need by selling unwanted items from around your house rather than apply for a loan. Games consoles and games, old mobile phones and other electronics can all make decent money if you sell them online.

Another option is selling gold – if you have any old jewellery that’s of no sentimental value but is made of genuine gold, a traditional pawnbroker or reputable specialist merchant may buy it from you, giving you some much needed funds.