What to Do If You Are Refused For a Loan

If you have approached a lender for a loan and have been turned down, it can be easy to feel frustrated or even embarrassed, especially if you disagree with the decision. After all, no one likes to be told no. It can be difficult to know what to do next, particularly if you are experiencing financial difficulties.

In this post, we share our expertise on how to turn a negative into a positive. Rather than regarding this as a setback, a loan refusal is an opportunity to reconsider and revamp your financial situation.

Understand why you were denied a loan.

The first step to solving any problem is understanding why it happened. Under the Equal Credit Opportunity Act, lenders must send you a written explanation setting out why you were refused the loan. They need to send this 60 days after their decision, but if you want it sooner, don’t be afraid to ask for it. It is important that you get the information from the lender and read it carefully. This document contains the key to understanding why you were denied a loan.

Check your credit reports.

There are a number of credit reporting bureaus who provide free credit reports. We recommend the major three: Equifax, TransUnion and Experian. You will need to check them carefully for any mistakes or inaccuracies. More than a quarter of credit reports contain inaccurate information, so spending time reviewing your report is vital.

If you do find any inaccuracies in your credit report, immediately write a letter to the credit bureau. It should set out clearly the incorrect information, why it is wrong and a request for it to be removed and replaced with accurate information. Be sure to include copies of all relevant documents (as well as a copy of the credit report) to support your claim.

Unfortunately, identity theft is a common occurrence, with more than 15 million Americans falling victim to the crime in 2016. Although financial institutions, card issuers and retailers are getting better at spotting identity fraud, we recommend that you regularly set aside time to check your credit report. Spotting suspicious activity as soon as possible means that you minimize the damage criminals can do to your credit score.

Tackle high interest debt first.

One of the factors in the loan refusal might have been the high interest debts that you are currently repaying. Make a list of what you are paying, and to whom. Beside each debt, note the interest rate. Then dedicate yourself to paying off the debts. Once you have paid off the debt, it might be tempting to close the credit account, but we advise you to hold onto it. An applicant with a long history with creditors is a less risky proposition than one with less evidence that they will pay back credit in a timely manner.

We recognize that you might not have the spare money to make increased payments. If you are having difficulties making payments, one option is to seek professional guidance on debt consolidation. This is where a large number of debts (often with high interest rates) are bundled into one debt, with a low interest rate.

Apply for a lower interest rate credit card.

Do you know what the interest rate is on your credit card? Compared to other cards, is it high or low? If you aren’t sure, then spend time doing the research.  If your current interest rate is unusually high, it might make sense to apply for a lower interest rate card and transfer the balance.  Be sure to read the fine print to make sure this is possible, and also that the lower rate will not increase after a set period.

Build up your credit score.

If you haven’t had much experience using credit, you will not have built up a credit score. Although you are not in debt, you will appear as more of a risk to lenders - you have not proven that you will pay back the credit on time. Take out a secured credit card (these are the cards that are aimed at users with bad or no credit), pay off the balance in full every month, and lenders will get the proof they need that you are not a risk.


We hope this blog has reassured you that there is life after loan denial! Being refused a loan is disappointing, maybe even embarrassing, but that there are a number of steps that can be taken to help improve your financial situation. Rather than allowing a loan refusal to be the end of your plans, see this as an opportunity to review your financial health.

It is tempting to make another credit application with a different lender, but focusing on fixing the issues you currently have is a far better step to take. If lenders see a rush of credit requests, they will consider you to be an applicant at risk of financial trouble and refuse the applications.

If you would like to seek legal advice about any of the matters discussed in this post, please contact the experts at Cabanillas & Associates. You can make an appointment online right now, or phone us on 1-800-LA FIRMA (1-800-523-4762).