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Top 12 Reasons Why Your Loan Application Gets Declined

12 Reasons Why Your Loan Application Gets Declined Updated on May 2024

It is a nightmare when the bank hits you with a “no” on your loan application, especially when you’re in a tight spot. We’ve all been there, right? When the money’s tight, you’re crossing your fingers for that loan approval. It looks like your whole world depends on it.

Now, picture this financial crisis mode. You’re not alone. We’re all in this crazy money rollercoaster together. When things get rough, your lifeline becomes that loan application. 

But here’s the real talk. There are some common mistakes lots of Pinoys make when they’re trying to score a loan approval. Let’s break it down and determine why your loan application gets declined.

Top 10 Reasons Why Your Loan Application Gets Declined

Over 60% of Filipinos turn to their family, relatives, and friends for financial backup. Unfortunately, not everyone gets the quick cash they need. Many Filipinos turn to loans when short on cash for their essentials. And let’s be honest. Sometimes, we even use them for the nice-to-haves. 

What kind of person are you? Do you slide into the DMs of a private moneylender? Or do you prefer to hit up your nearest and dearest buddy for some cash love? 

If you belong to the first group, guess what? You’re not alone. You are part of the astounding 20.2% of Pinoys doing the same hustle. 

Welcome to the club! 

However, that’s not how your money dilemma ends. You still have the anxiety of getting approved for the dreaded quick cash. Save yourself from the stress by learning the causes of possible delays in loan approval. Stay clear about the reasons why your loan application gets declined.

12 Reasons Your Loan Application Gets Declined

Have you ever wondered, “Why do I keep getting rejected when I need a loan?” Let us unpack the mystery of why your loan application gets declined. Here’s the lowdown on the top reasons these loan companies might be giving your application the once-over:

1. Moving a lot results in a loan application getting declined

If you have already tried applying for a loan, you will notice that the lender requires both your current and permanent address. Also, it asks for a billing statement to validate where you live. 

Some borrowers tend never to pay their loans. Sadly, lenders will have no choice but to send a collections officer to their homes to get their repayment. These collectors aren’t playing hide-and-seek for fun. Their mission is to collect what’s owed. Unfortunately, some of these borrowers will become runners and move to another place to escape. 

Now, if you’re the type who constantly changes addresses, it could set off some financial stability alarms. Lenders plan to make sure they’re handing out loans to folks who are not just here today but gone tomorrow.

Here’s the real talk. When lenders ask for that billing statement to confirm your address, it’s not just to add to their paperwork collection. It’s a way to ensure you’re not pulling a disappearing act. 

2. Faking documents

Falsifying documents is a sin in any way you look at it. However, some Filipinos do it to try their luck and escape it. If the lender catches you, you not only lose your chance to get a loan, but you will also be marked as a red flag, or worse, legal action can be filed against you.

fake documents result to loan application gets declined

Creating fake documents is a tempting shortcut. But let’s be clear. It is a straight-up no-no, no matter how you spin it. Despite the apparent risks, some Filipinos still do it, hoping to sneak by unnoticed and score that loan.

But what if the lender catches your document shenanigans? It is a game over for all your future loan applications. Every time you try to apply for a new loan in a different lending company, you’ll be given a sign screaming, “This person tried to pull a fast one!”

Sadly, it doesn’t stop there. If the lender you tricked is strict, wait for legal action. Falsification of documents is more than just bending the rules. It is breaking them. 

So, while the temptation to doctor those papers might be there, it’s a risky game with consequences extending beyond a declined loan. Keep it legit, play by the rules, and save yourself from financial trouble. 

3. High debt-to-income (DTI) ratio

The debt-to-income ratio is the amount of money you bring in compared to what you owe. Too much debt compared to your income might set off alarms. Balance is essential. Show the lending institutions you are responsible for the money juggling act.

Moneylenders do value their business. Unlike loan sharks, they give loans to desperate borrowers with a high DTI ratio. Then, they suck every cent out of unaware victims. A legitimate moneylender will only approve a loan to those they deem capable of handling the repayments.

If you have multiple overdue loans, paying them off before you get another loan is better. But you should wait to apply for a new loan to repay your existing loan. It helps you avoid further financial strain. On the other hand, loans are created to consolidate the borrower’s existing loans.

RELATED ARTICLE: Rewards For Being A Responsible Borrower And How To Be One

4. Unable to meet the eligibility requirements

Meeting eligibility requirements is like the golden ticket to saving your loan application. However, not all lenders have the same checklist. Some are less stringent than others. 

Lenders cater to different borrowers. Some lend to the employed, others give pensioners loans, and others offer loans to OFWs. Some lenders can only provide loans in a particular area.

Before you make an application, check the eligibility requirements. Most lenders in the Philippines have required age, citizenship, and source of income. If you are not eligible in one lender, then you have to look for other lenders who have eligibility you can fit into. It is one of the reasons why you might have your SSS Salary Loan rejected. 

For example, you’re all set for an SSS Salary Loan, but rejection hits. One of the key culprits? You are unfit in the eligibility puzzle.  But there’s still a silver lining. If one lender gives you the cold shoulder, it’s time to check out other lenders. See if their eligibility criteria align with your life situation. 

5. Asking more than you can handle

A loan application gets declined, just like how you lose in gambling. When applying for a personal loan, make sure you’re not betting more than you can afford to lose. Always remember to use a loan calculator to see how much you can borrow, how much you have to pay if charged with the interest rate, and how much each repayment will be according to your chosen term.

The loan calculator helps you see how the repayments will impact your finances. Also, you can check if you can handle such additional responsibility. Knowing this lets you know how much the lender will willingly lend. 

Some lenders are not fans of big spenders. Don’t be shocked if you ask for a sky-high loan that is way beyond what your wallet can manage. Legit lenders will slam rejection right in your face.

So be smart, check the numbers, and figure out a loan amount that won’t have your wallet screaming for mercy. It is not just about what you want. It is about what you can realistically handle. 

6. Unstable job history

Job and income instability means you are hopping from job to job like a bunny on caffeine. Or, your income looks like a rollercoaster ride. Banks and money lending facilities might start second-guessing if you can handle the loan repayment.

Of course, the lender will only approve loans if they can see that the borrower has a stable flow of income. If you don’t have a regular job, how can you assure the lender that you can pay your loan if you lose your job? Most lenders will only lend to applicants who have been working for their companies for at least six consecutive months.

But what if you are self-employed? Do not worry. You can still apply for a personal loan. Present the essential documents like your current bank statement. It proves you have had a constant income for six months to a year. However, banks require at least two years of experience in your current job. 

7. Not answering calls

Lending is risky; they call their borrowers for information validation to lessen the risk. Answering those phone calls isn’t just a courtesy. It is crucial for the lender to evaluate your information. It is like a background check for your financial story. That’s why your cooperation is vital to keep your loan application gets declined.

not answering calls lead to loan application gets declined

First, ensure you have indicated your active contact numbers. You’re playing hard to get if they can’t reach you, and as a result, they might lose interest quickly. 

Second, if you are asked to provide some contact persons as references, do not hesitate to give these people a heads-up. Tell them that a loan manager or verifier will call them regarding your loan application. It is best to prepare them for the hot seat; no surprises, just straight talk.

Lastly, do not hesitate to tell your lender what you plan to do with your borrowed cash. Lenders usually have various loan solutions for different purposes. The best money lender will point you to the loan that perfectly matches your financial goals.

So, when the lender calls, pick up. Cooperation, transparency, and a touch of honesty are the winning combo in your personal loan approval.

8. Incomplete documents

The paperwork drama. You wouldn’t believe how many Pinoys mess this up. Incomplete forms, unclear documents, and missing signatures are like a paperwork party foul. 

Banks are strict about details. So ensure you have completed all your documents. Meanwhile, licensed lenders are not here for incomplete document dramas. They have a document checklist; if you lack one, it’s a no-go. They are not just being nitpicky. Instead, lending facilities are like financial detectives. They assess these documents to validate your information. So, if you fail to comply, your application will not be processed.

So, your paperwork is about more than just following the rules. It secures your landing to loan approval. Always have your documents clear, complete, and ready for inspection. 

9. Inconsistencies with your information

The honesty game. Hold nothing back when discussing your financial history. The banks will determine if you’re keeping your income or debt secrets. And once they confirm it, they might see that as a red flag. So, keep every tiny detail accurate and let them in on the whole money picture.

Money lending companies use the documents you submit and interview your reference character. From here, they can draw their conclusion on your creditworthiness. Inconsistencies and dishonesty in the data in your filled-up application form, documents, and IDs will create confusion. As a result, credit providers will have a notion that you need more to be more credible.

So, when it comes to your information, let’s keep it consistent and honest. It’s not just about checking the boxes. It is about building a credibility fortress. Tell them your financial story they can trust with no plot twists or hidden chapters. That’s how you can win at the honesty game and keep those loan approval doors wide open.

10. Bad credit report equates to a loan application being declined

Republic Act No. 9510, also known as the Credit Information System Act, mandates banks, authorized lenders, and other financial institutions to submit their borrowers’ payment behavior into a centralized system that the Credit Information Corporation (CIC) keeps.

bad credit report

Once you apply for a loan, banks and other moneylenders use your credit history found in the centralized system. They get an idea of your paying habits. If you have missed your payments for your previous loans, this will alert the lenders that you might also do the same in your future loans.

Paying your loans on time is more than just a suggestion. It is a financial commandment. Any delinquency in loan repayments can cast a dark shadow on your credit report. And it’s not just about late payments; defaults, tax evasion, and money-related offenses like estafa are also on the blocklist. That is why it is essential to pay your loans diligently. 

It could take years to rebuild a positive credit report.

Are you rebuilding a positive credit report? That’s no quick fix. Your credit report can mean your credibility as a borrower. Every positive and negative payment behavior is recorded, which will make up your credit history.

RELATED ARTICLE: Credit Report Philippines: Facts Every Borrower Must Know

A good credit score is not the sole dictator of your loan approval fate. Your loan application could still face rejection even with a shining credit report. It applies when you’ve done one or two things on the list above. 

When getting a loan, you must show the lender you are worth the credit. You must pay on time, play by the rules, and avoid financial missteps that result in your loan application gets declined. 

11. Many pending loans

Money lending facilities are very strict when checking your ongoing loan obligations. Lenders calculate if your monthly income is sufficient for additional payment management. How can you pay off an additional responsibility if you are currently paying for your debts and other obligations? 

It is crucial that you only process your loan application as needed. In addition, make sure to repay your installments in banks or licensed money lenders on time. As stated above, moneylending facilities review your credit situation through your financial profile. Credit providers can access even the loan you took from a third party. Your loan application gets declined if it shows that you have numerous existing debts. 

Don’t worry. You can prevent your loan application rejection. You must keep your active debts to a minimum. Save at least 40% to 50% of your monthly salary for repayment. This way, you can manage to fulfill your obligations diligently. 

 Personal Loan Application Gets Declined

12. Multiple loan inquiries

Let’s face it. When we need quick cash, we tend to request help from anyone we think can help. Sometimes, it results in multiple submissions of personal loan applications from various lenders. However, every loan inquiry gets recorded. 

The banks and legit moneylenders you applied to will request your credit report. Once they have, they can see your credit score and all the personal loan inquiries you’ve made. As a result, credit providers doubt your creditworthiness. In addition, they will perceive your application as credit-hungry. 

You need money, but lenders interpret it as a desperate and irresponsible move. Avoid such a disappointing situation by weighing all your options. Figure out if you really need to apply for a personal loan. If you do, shop around first. Do your research beforehand and compare all the nearby trusted lenders. This way, you are a hundred percent sure of your financial decision. Most importantly, there is no way your loan application gets declined.


Dodge the twelve common mistakes to get a green light for your loan application. If you keep it real and show them your financial credibility, you will receive the salary loan approval you’ve been waiting for. 

Good luck out there!

But everything’s not based on luck if you have Cash Mart. The licensed moneylending company guides you to the most appropriate loan. It hands out an instant cash loan as long as you are eligible. 

Check out their website and see how to secure the loan approval you need!