What To Do When You’re Refused a Personal Loan (UK) 

Being rejected for a personal loan can be demoralising, but you shouldn’t let it get you down. After all, it happens to everyone from time to time and can occur for a range of reasons. Below, we explain some of the reasons why you might have been rejected for a personal loan before suggesting what you should do next. 

Possible reasons for the rejection 

Low credit score 

Everyone has a graded credit score, which is determined by third parties and is based on your credit history. If you have a poor track record of repaying loans, credit cards, and other forms of borrowing, your score is likely to be low. Lenders look to your credit score before deciding whether to approve your application and if you’re perceived as a credit risk, they’re likely to reject your loan. While every credit bureau scores credit differently, paying your bills and loans on time in the past and ensuring your personal details are up to date will help you build a better credit score.


In some cases, you might not actually be eligible for the loan that you’ve applied for. For instance, some lenders only approve borrowers who have been in the UK for over three years, while many financial institutions will only give money to people over the age of eighteen. As such, reading up on the eligibility criteria before applying for a loan is an important first step.

Commercial criteria 

Remember, lenders are companies, and they need to make a profit to stay in business. In other words, they need to approve loans that will return them enough money to make the transaction viable. Sometimes, borrowers are rejected because they’re deemed to be unprofitable. In other words, the lender can’t charge a high enough interest rate based upon your credit history. It’s for this reason that there’s no such thing as a perfect credit score, as people at both ends of the spectrum might have applications rejected.


The most important thing to a lender when deciding on whether to give you credit is if they think you can pay the loan back. If the lender doesn’t think you can manage the repayments, they will reject the application. Most responsible lenders look at your current income and expenditure to get a good idea of what you can realistically afford. If you think you might be restricted because of affordability, consider applying for a smaller loan amount.

A credit file error 

Lenders typically get your information from one of three Credit Reference Agencies – Experian, Transunion, or Equifax. It’s really important for you to keep your file up to date, so you should check through the details that each agency has on record. If you notice any mistakes, contact them directly to rectify them as soon as possible.

What to do after a loan rejection 

Don’t apply for a payday loan

While payday loans are broadly marketed as a viable solution to your short term money issues, the reality is that they come with extortionate repayment terms. Payday loans come with high interest and also limit your chances of being approved for credit in the future. While it might be tempting, it’s really important not to apply for a payday loan.

Find another lender 

There are plenty more fish in the sea as far as lenders are concerned and just because your application was rejected by one, it doesn’t mean you won’t be successful with another. This is because lenders interpret loan applications and credit scores differently, so you should widen the net and look for another lender if your first application is rejected. You could, for instance, apply for an unsecured personal loan from Koyo Loans, a lender that utilises Open Banking to make fair and accurate decisions about borrowing based upon your current financial situation.

Work on your credit score 

If you have a bad credit score, then your ability to borrow money is limited. Therefore, it’s a good idea to work on your credit score if you’ve experienced rejection, as this will improve your chances in the future. Making payments on time is the first step towards improving your credit score while keeping your file up to date is another.

Avoid borrowing 

After your loan application is rejected, it’s a good idea to take stock of your current circumstances. Do you really need to borrow money? If you can get by without the loan, you can just continue with your business as normal, and you don’t need to think any more about the application. Instead, you could start a savings account and look to accumulate enough money over the next few months to pay for the product or service outright.

The most important thing to remember after being rejected for a loan is not to panic. It happens to people all the time and isn’t necessarily a reflection of your financial situation. The above tips will help you understand the reasons for your loan rejection and ensure you can pick yourself up and re-apply to a different lender.