A personal loan is a loan taken for a variety of reasons. Personal loans can be taken to offset the debt, pay rent, or cater to small expenses. Such expenses include medical bills, vacation costs, funeral costs, etc. They are usually offered by banks, online lenders, and credit unions. The money loaned is usually paid back over some time, with interest. Some lenders may charge additional fees.


First, you’ll write and complete an application giving information about you to the lender. This provides the lender with relevant information about you. 

Second, if the lender approves your application then they’ll reply with a copy of the terms and conditions of the loan which you can either agree to or reject. 

Third, the next step after the agreement is to finalize and complete the paperwork. After that is done, the lender funds the loan by a cheque or bank deposit. 

Personal loans are usually paid back in installments in addition to an agreed amount of interest. The interest paid is expressed as an annual percentage rate (APR). The average APR is 9.41% as of June 2019,  but it can range from 6% to 36% depending on the borrower’s creditworthiness. 

When applying for a personal loan, check your credit score and credit report to ensure that all your information and details are accurately presented in the application. 

Also, it is very crucial to apply for a personal loan from a credible lender, preferably a bank, credit union, or online credit facility. Avoid loan sharks and other lenders with zero credibility. Before making a decision on which lender to select, try and compare different lenders’ terms and conditions to each other, the interest rates, and extra fees, this helps you make the best choice amongst a variety of options. 

Finally, it is important to negotiate a convenient payback amount and period with the lender. While some lenders allow flexibility with payback periods, others do not. Hence, it is important to select a lender with a flexible payback period, with fewer charges, interest, and fees. 


Sometimes personal loan applications may be turned down and rejected by the lenders due to many reasons. These reasons vary from having incorrect information on your application to being too young or old to apply. Here, we discuss a  few reasons why a personal application may be rejected.  

Incorrect information on the credit report. 

When there are errors on your credit report and the information is no longer represented accurately, this can lead to the rejection of your application. Such information may include outdated information and include duplicate debts on the application. Lenders would usually state reasons why an application was rejected so watch out for those. The accuracy of the information on your credit report is extremely important. It is important to amend and correct any detected errors on your credit reports as soon as you can. 

Poor credit history

 Having a poor credit history can mean the lender has insufficient credit history to apply for the loan or the submitted credit report has a poor repayment history or having overdue debts that have not been repaid. Having a poor debt record can disqualify you from accessing a loan from a lender. 

A large amount of debt. 

Having a large amount of debt may disqualify a borrower from accessing a loan from a new lender. If a borrower has a huge amount of debt to service or their credit history shows that they currently owe a huge amount of money, then the lender may not be motivated to give out such a loan. 

Insufficient income or job instability. 

For a lot of people, remuneration from employment is the main source of stable income. However, when a borrower does not have a regular amount of income coming in or does not have stable employment, the lender assumes the borrower cannot service the loan or payback. Having a steady amount of income is proof to a lender that the borrower is capable of paying back. In the absence of such proof, the loan application will be rejected.  If the lender can find out that the borrower has a stable earning job, then they are sure they can afford to pay back. Having an unstable career or switching jobs now and then gives a bad impression to the lender. It also implies that you are irrelevant and unreliable to the organization you are working for. Since personal loans are unsecured, there is no collateral involved. Hence, the only way a lender can ensure the borrower can pay back is through their income. This can not be ascertained if the borrower has no job or keeps switching jobs. 

Debt to income ratio.

The debt to income ratio of a person is calculated as your monthly debt payments divided by your gross monthly income. Lenders usually use this ratio to measure if a borrower can manage monthly repayments to service the loan. Demonstrating an ability to pay back a loan as at when due will encourage the lender to give out a loan. Borrowers with a higher debt-to-income ratio will have a higher problem with repaying or servicing debt as opposed to borrowers with a lesser debt-to-income ratio. 

Age criteria. 

The minimum age requirement to qualify for a personal loan is 21 years old. Hence, anyone who is younger than that is not qualified for the loan and such applications will be rejected. The age limit for a personal loan is 60 years old. Anyone who is older than 60 cannot receive a personal loan as they are most likely retired and may not have an active, stable income anymore. It is crucial to ensure that anyone who applies for a loan falls within the recommended age bracket. 

Too many applications in a short time. 

By submitting a lot of applications within a short period, you are indirectly telling the lender that you are desperate and credit-hungry and this will do more harm than good for your personal loan application. Sending a lot of applications will most likely get your applications rejected as no lender wants a risky borrower. 

Tried to borrow way too much.

When a borrower has tried too many times to borrow and fails, this sends a message to the lender that they are most likely not creditworthy. Also, if a borrower tries to borrow a huge amount of money at the same time, this discourages the lender from granting the loan or accepting the application.  No lender wants to take risks with their money especially for personal loans that require an existing credit score. 


Whether one is applying for a personal loan or has been rejected, it is important to take note of these possible reasons so as to learn from their mistakes and work on them in the future. If it is your first time applying for a personal loan, be sure to avoid making mistakes on your application, applying for too many loans in a short time, etc. This helps you stand a better chance at getting the loan application granted.

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