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Some people wish that personal finance was a mandatory course in school because they have little knowledge that can barely help them. Unfortunately, most people get to learn about it through mistakes in life. Knowing how to manage personal finances is important because we will use our funds every day of our lives. There are times where you may need a personal loan, but the lending bodies may not approve your requests. Here are some of the reasons as to why your request for a personal loan may not be approved.

Reasons why your loan application may be rejected

No credit

When you do not have credit, it means that you have never had credit. Thus you do not have any credit history. Therefore, the bank will not have any source of references. Credit accounts can be used by the banks to make informed decisions as to whether you will pay the back the loan or not. When you do not have any history, you will make it hard for them to make an educated decision. Keep in mind that having no credit is worse than having bad credit.

Low credit

There are several forms of low credit. For example, if you are using more than 30% of your allowable debt, it can negatively impact your credit score. Also, if you often shop around for loans, that will affect your credit score. Other factors that may affect your credit score include bankruptcies, lapses in payments and defaults. The lenders will also look at some assets you have just in case of a default. In addition to that, they will consider the type of debts you have. If you have diversified debts, your request may be disapproved.


When applying for a loan, the lenders will require that you provide them with your income documents. The loan request may work against you if you are unemployed or underemployed. In addition to that, some lenders ask for the employment history to see how long you have been with an employer. That will determine your job stability. If you have gaps or frequent job changes, your request is likely to be declined.

The purpose of the loan

You might wonder why the bank will disapprove the request yet you will pay them back. Believe it or not, the banks and other lending institutions can set the parameters that surround their disbursements. Therefore, they will accept or reject your plea based on what you want to use the money for.