5 Loan Rejection Reasons | Why Your Loan Application Is Rejected

Expecting a loan to augment your business can be extremely disappointing if your loan application is being rejected. Loan rejection always put a dent in your plan to grow your business to a new height. Here we shall look at top five loan rejection reasons.

Largely, the productiveness of a business hinges on access to investment opportunities and funds. Since many small and medium-scale enterprises (SMEs) have much dependence on commercial banks and other organizations for business loans.

Meanwhile, it is important to say, here, that is a shift away from the conventional organizations to financial technology, known also as FinTech. Besides the banks, a new wind of lending avenues are breezing their ways in the loan market. It is quite easy to request for loan in commercial banks in Nigeria and other loan offering organizations. Although the success of your application is not automatic as it hinges on some factors.

5 reasons your loan application can be rejected

Below, we look at the five factors that may lead to your loan application being rejected:

1. Lack of Good Credit History

When the repayment history of the loans you have taken previously are analyzed and it is found out you have defaulted in repayment of loan in some cases, that’s a bad credit history in simple analogy. This is the process that gives lenders the details of the loans you have taken before.

This may sound bizarre to you because many Nigerians are not aware of this strategy, the new loan seekers especially. To get a loan, your credit score plays a vital role.

Whenever your loan application is rejected on no clear ground, you can visit your credit score if it is below the required points. Knowing your credit score before initiating a loan request will let you know whether your application stands a chance of scaling through or not.

2. Lack of Enough Collateral

Giving loan to businesses without collateral is a risk that commercial banks and other loan offering institutions do not want to take. If you want to apply for a bank loan, it is likely that the bank will demand physical collateral worth of the amount you are seeking in loan. To scale this huddle, put together in a document all the assets you intend to use as a collateral for the amount you want. This may include your home or car.

3. High Indebtedness

Account balance, statement of account, salary–all do not qualify as justification for loan approval. If your loan application is rejected, maybe you have been found to be highly indebted over outstanding unpaid loans. Lenders always investigate and take risk-management decision for loan application.

4. Low Income

If it is discovered that your business’s income potential is low and does not stand the chance of being able to repay the loan, your application can be rejected.

5. Poor Business Plan

Your loan application may not be considered if it is considered being shallow in terms of business proposition. This will discourage lenders from investing money in a business that does not have a clear, convincing strategy.


Although these reasons may not be clear or acceptable to loan applicants. However, they are very important to loan institutions for deciding when you should be given a loan or not.

Source: Nyscinfo

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