What happens if your loan application get rejected?

Applying for a loan can be an excellent choice for those who need to raise cash quickly, and in the age of internet banking it has also become very simple. Whether you’re looking to consolidate debt, make home improvements or buy a car, there are options available.

But what steps can you take if you get rejected? Fortunately, there are a number of avenues to consider.

Apply with a broker

Often, people will apply for a loan directly, approaching a specific lender. If this approach does not work though, then you can consider applying through a broker.

A loan broker will take your details and then reach out to several lenders on your behalf to find deals that are applicable to you. The benefit of applying through a broker is that they will likely return several options, some of which may suit your needs better – for example, they may match you with lenders who offer lower interest rates or more agreeable repayment terms.

It is worth bearing in mind how the loan broker makes money – often they will earn a commission from the lender they pair you with, meaning that you don’t pay for the service; however, some will charge you for the service, so it’s worth understanding the terms upfront.

Apply with a different Direct lender

If your loan application has been rejected by one lender, the solution could be as simple as applying directly to a different one.

If you understand why you were rejected. For example, if you were rejected initially because you were asking for too long a repayment term, you can look for a different lender who offers the terms you are looking for. It is always worth doing a little research in the first place to find the lender most appropriate to you, whether that is before your first application or after.

Apply for a smaller loan

Unsurprisingly, the size of the loan you are applying for is a key factor. The lender should provide details on the reason for your rejection if you are unacceptable. If it is because of the amount you have asked for, you could always consider asking for less.

Depending on your circumstance, and what you need the loan for, this could be a perfectly valid option. Indeed, if you initially asked for more money than you would need, then it can be an ideal choice. It is also worth bearing in mind that if you can get by with the smaller sum of money, it will be beneficial to you in the long term as you’ll have less to pay back, and less interest charged.

Look at alternatives

Alternative forms of borrowing are available. An overdraft may be of interest if you are looking for a smaller amount of money, while credit cards may be a good choice for slightly larger sums – it is always worth shopping around with these two options, as different accounts and lenders will offer different terms, and benefits, that may be more favourable to you.

It may also be worth considering non-formal borrowing; if you are able to borrow from friends or family, then you may be able to get the money you need without approaching a financial organisation.

Credit score implications with ‘over-applying’

Your credit score is one of the most important factors in any financial application. When you apply for a loan – or any other form of financial borrowing – you will trigger either a soft or hard credit check. Every one of these will count against your credit score.

Ordinarily, a credit check will not be a problem and might simply knock a few points off your rating. However, a string of checks can ring alarm bells, particularly if you are rejected multiple times. Not only will you lose a few points with every application, but you will also put future lenders off if they become aware that your application to them has followed rejected applications to several others.

A string of rejected applications – known as over applying – will make it clear to lenders that you are unable to match the terms given by others, and increases the chance of them rejecting you too.

If you have been rejected, then it’s important to check the terms of that rejection. If it’s because you have asked for too much, then research to find a lender more suitable. If you are rejected a second time then it is likely that your credit score already is not enough, or that you simply cannot afford the loan you are applying for.

A rejection can be disheartening, but often is an indication of your situation – multiple rejections, while impacting your credit score, also indicate that you may not be in the position to increase your borrowing.

What are the alternatives to taking out a loan?

So, you’ve found yourself in a tight spot, and you need some quick cash. It can be a stressful time, but you need to make an informed choice about how to handle your finances. Taking out a payday, personal or short term loan, for example, can leave your money in a mess. In this post, we’re going to break down the disadvantages of taking out loans and offer some viable alternatives.

What’s so bad about loans?

Certain types of loan fall into a ‘bad debt’ category, offering no way to improve your finances in the long run. They tend to be an impulse or unnecessary purchase and have no realistic way to pay them back due to high-interest rates. Let’s take a look at a couple of examples:

Payday loan

In offering short-term loans for small amounts of money, internet sites and high street shops often provide payday loans. They are easy to get, but the interest rates are high. They are difficult to pay off, and you can end up paying back ten times what you borrowed.

Personal loan

Also known as unsecured loans, you take these loans from a lender or bank without securing them against any asset such as a house. As well as high-interest rates, these often come with origination fees, fixed monthly repayments and frequently attract scammers.

Short term loan

Like a payday loan, short term loans are where you pay back the amount borrowed and interest within a year of the loan. They are high risk and have the same hazard of turning into a debt cycle, taking out further loans to cover the initial loan.

What are the alternatives?

Luckily, there are viable alternatives to taking out a loan, posing less risk to your financial health. All these types of loan come with a realistic repayment plan, allowing you to clear your debt with affordable and regular payments.


An overdraft allows you to borrow small amounts of money from your bank’s current account. Some providers automatically offer this option, and with others, you need to request it. They tend to be flexible in both their borrowing and repayment options and are cheaper to repay than short term loan options.

Credit Cards

For regular spending and small amounts of money, credit cards offer a suitable alternative to loans. Your provider will set a credit limit, setting a maximum amount you can borrow and will take into account your credit score, helping prevent a debt cycle. Plus, in the UK, credit card purchases benefit from section 75 of the Consumer Credit Act, meaning the provider has joint responsibility with you for any breach of contract or misrepresentation by a retailer.


It’s useful to remember those pockets of money you might have tucked away in an ISA or savings account. Even if you were saving up for a holiday, it could be better to use this money than to pay a loan provider more than you borrowed. Some savings accounts also need notice for you to take out money, helping prevent impulse buys you can’t afford and a sensible approach to boosting your finances.

There are plenty of options when it comes to borrowing money. So, consider all your alternatives to taking out a loan and make an informed decision for your financial future.