Personal Loan Denied? Here’s What to Do Next

If your personal loan application is denied, the lender is required by federal law to send you an Adverse Action Notice explaining the specific reason. That notice is your roadmap. The reason for your denial determines both your next step and how long it may take to resolve. 

Most common denial reasons include low credit score, high debt-to-income ratio, or unverifiable income, which are generally fixable with the right approach. A denial reflects your financial profile at a specific point in time, not a permanent decision.

Why personal loan applications get denied

Lenders consider many variables when reviewing a personal loan application. So a denial can be due to not meeting the minimums required by the lender on one or multiple of the variables. While approval criteria vary by lender, some of the most common denial reasons include:

• Low credit score
• High debt-to-income (DTI) ratio
• Insufficient or unverifiable income
• Too many recent hard inquiries
• Application information that could not be verified

Understanding these common issues may help you determine which part of your financial profile needs improvement before you apply again. You can also review common personal loan eligibility requirements to better understand what lenders may consider. 

According to Experian, credit history and debt-to-income ratio are among the most commonly cited factors in personal loan denials.

What happens immediately after you’re denied

After you’re denied a loan, a few things will happen.

You’ll receive an Adverse Action Notice

When a lender denies your application, federal law requires them to provide an Adverse Action Notice under the Equal Credit Opportunity Act. This notice explains the specific reason, or reasons, your application was declined.

In some cases, the notice arrives automatically by email or mail. If it does not, you have up to 60 days to request the reason for the denial.

This document is important because it serves as a roadmap for what to improve. Rather than guessing why you were denied, focus on the exact variables identified in the notice.

A hard inquiry may already be on your credit report

If you completed a full loan application, the lender may have performed a hard credit inquiry. Hard inquiries may lower your credit score by a few points and generally remain on your credit report for up to two years.

Multiple inquiries within a short period may signal increased borrowing risk to future lenders. According to Experian, a single hard inquiry typically lowers a credit score by fewer than 5 points. Spacing out applications and avoiding unnecessary hard pulls may help protect your credit profile.

Learn more about how a hard inquiry affects your credit before applying again.

You are not locked out permanently

A denial is not permanent. Financial profiles change over time and you may be able to improve the reasons you were denied in the first place. You’ll just have to take the time to make changes to your credit profile and figure out how long it may take to address the issue identified in the notice.

How to fix the specific reason you were denied

Denied for low credit score

If your application was denied because of your credit profile, start by requesting a free copy of your credit report from AnnualCreditReport.com.

Review the report carefully for inaccuracies. Incorrect balances, duplicate accounts, or outdated information may affect your score more than expected. If you find an error, file a dispute with the credit bureau reporting it.

You may also improve your credit profile by:

• Paying down revolving credit card balances
• Making all payments on time
• Avoiding new credit applications
• Keeping older accounts open when possible

Meaningful credit improvement often takes three to six months, though timelines vary based on the variables affecting your score.

Denied for high debt-to-income ratio

Your debt-to-income ratio compares your monthly debt payments to your gross monthly income. Lenders often consider DTI because it helps them evaluate how manageable another monthly payment may be.

Most lenders prefer borrowers with lower DTI ratios, though acceptable ranges vary.

There are generally two ways to improve the ratio of your debt to income:

• Pay down existing debt
• Increase income

For example, paying off a credit card balance or reducing another loan payment may lower your ratio relatively quickly. Alternatively, additional income from side work, freelance projects, or a raise may also help improve your application profile because it can help lower your DTI.

Depending on your debt load, improving DTI may take anywhere from one to six months or longer.

Denied for insufficient income

Income verification issues are sometimes easier to fix than applicants expect.

Lenders may consider multiple income sources, including:

• Employment income
• Freelance or gig work
• Investment income
• Rental income
• Alimony or child support
• Military benefits

If your income was under-documented, submitting clearer documentation may help. Pay stubs, tax returns, and bank statements may be requested.

If your income genuinely falls below the lender’s comfort level for the requested amount, applying for a smaller loan may improve your chances because it reduces the lender’s potential risk exposure.

Denied due to a recent hard inquiry or too many applications

Applying for several loans within a short timeframe may hurt your approval odds because lenders often view repeated applications as a risk signal.

In many cases, waiting at least 30 to 60 days before reapplying may help. During that time, avoid unnecessary applications and focus on strengthening other parts of your profile.

You may also want to prequalify before reapplying. Prequalification tools may use soft credit pulls instead of hard inquiries, which means you may be able to compare offers without affecting your credit score.

Denied because information couldn’t be verified

Sometimes a denial happens because the lender could not confirm information provided on the application.

This may include:

• Income discrepancies
• Missing documentation
• Identity verification issues
• Address mismatches
• Expired identification documents

If this happens, contact the lender. Some verification issues may be corrected without requiring a new application.

Having updated documents ready, like pay stubs, tax returns, bank statements, and government-issued ID, may help speed up the process.

How long should you wait before reapplying?

Some lenders require applicants to wait before submitting another application. In other cases, there may not be a formal waiting period, but reapplying immediately may not improve your odds if nothing has changed.

As a general rule, it often makes sense to wait until you’ve addressed the issue identified in the denial notice.

For example:

• If you need to lower your DTI, wait until debt balances decrease
• If you need to improve your credit score, allow time for positive payment history to build
• If the issue was documentation-related, you may be able to reapply sooner

It’s also important to remember that each hard inquiry may affect your credit profile, so repeated applications in a short period may compound the issue.

Should you reapply with the same lender or a different one?

Reapplying with the same lender may make sense if you have meaningfully improved the variables that caused the denial.

For example, if your application was denied because your income could not be verified, submitting clearer documentation later may improve your chances. However, reapplying too quickly with the same financial profile may lead to the same result.

Applying with a different lender may also help because lenders consider different variables and may have different approval criteria. Some lenders may place greater emphasis on credit history, while others may consider broader aspects of an applicant’s financial profile.

Using soft-pull prequalification tools may help you compare options more safely before completing another full application.

You might also consider:

• Requesting a smaller loan amount
• Extending your repayment term
• Adding a co-signer if the lender allows it

What happens if you’re denied by Upstart and how to reapply

Your Adverse Action Notice through Upstart

If your loan application through Upstart is declined, you may receive an Adverse Action Notice explaining the reason for the decision. Reviewing this notice carefully may help you identify which variables affected the outcome.

Applicants may also log into their account to review denial details. In more complex situations, Upstart customer support may help explain the notice and discuss possible next steps.

Upstart’s reapply rule

Upstart generally requires applicants to wait at least 30 days from the date of denial before submitting another application.

Because of this waiting period, it may help to use the time to improve the variables identified in your denial notice before submitting another application.

If you were denied due to a hard inquiry

In some cases, applicants may be denied because a new hard inquiry appeared during the review process.

Upstart has a documented process for contesting this type of decline. Contacting Upstart support and providing relevant documentation may allow the application to be reassessed. If the inquiry is cleared, the application may be reset so the applicant can proceed with reviewing final terms.

What to improve before reapplying through Upstart

Upstart considers multiple variables when reviewing applications, including credit history, income, employment, and other aspects of an applicant’s financial profile.

Rather than focusing on only one metric, applicants may improve their odds by strengthening whichever variables were identified in the denial notice.

Upstart’s rate check process uses a soft credit inquiry, which means applicants may check rates without impacting their credit score.

Ready to try again? Check your rate through Upstart. It takes just a few minutes and checking your rate won’t affect your credit score.

Frequently asked questions

How long does a personal loan denial stay on your record?

The denial itself does not appear on your credit report. However, the hard inquiry associated with the application may remain on your report for up to two years and may affect your score for approximately 12 months.

Does being denied for a personal loan hurt your credit score?

The denial itself does not hurt your credit score. However, the hard inquiry from the application may lower your score by a few points.

How soon can I reapply for a personal loan after being denied?

How soon you can reapply for a personal loan after being denied depends on the lender and the reason for denial. Some lenders recommend waiting at least 30 days. Upstart generally requires a 30-day waiting period and a new email address before reapplying. If the denial reason involves your credit profile or income, it may make sense to wait until those variables improve.

Can I reapply to the same lender that denied me?

Yes, you can reapply to the same lender that denied you for a personal loan, but it generally helps to address the denial reason first. Reapplying immediately with the same financial profile may lead to another denial and another hard inquiry.

What is an Adverse Action Notice?

An Adverse Action Notice is a written explanation lenders are legally required to provide when they deny a loan application. It explains the reason for the denial and may help you understand what to improve before reapplying.

Can I get a personal loan after being denied?

Yes, you may be able to get a personal loan after being denied one. A denial reflects your financial profile at a specific point in time. Improving the variables identified in the denial notice such as credit utilization, income documentation, or DTI, may improve your chances on a future application.