Getting a loan declined means the door to your financial goals has been slammed shut. Whether you were counting on it to cover bills, fund a move, or get out of an existing debt spiral, a rejection often brings more questions than answers. But it's not the end of the road—far from it.
A declined loan application can be the turning point that forces you to reassess, reset, and find more sustainable solutions. Here’s what you need to know—and do—next.
Why Was Your Loan Rejected in the First Place?
Before exploring other options, it’s crucial to understand why your application was knocked back. Lenders don’t decline loans randomly. They’re usually responding to one or more red flags in your financial profile. These may include:
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Poor repayment history (including late payments on credit cards or Buy Now Pay Later)
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Too many existing debts
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Unstable income or employment
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Incomplete documentation
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Applying for too many loans in a short period
Under the Privacy Act 1988, you’re entitled to access your credit report for free every three months from agencies like Equifax, illion, or Experian. Review it closely for errors or outdated entries. If you spot something that doesn’t add up—like a debt you’ve already paid—request a correction immediately.
Option 1: Talk to the Lender
Before you assume you're out of options, call the lender. Many institutions are more flexible than they appear, especially if your situation has changed since you applied.
You can ask:
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What specific part of my application led to the rejection?
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Can I reapply with a co-signer or guarantor?
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Would a smaller loan amount make a difference?
Some lenders may offer alternative products with more flexible criteria, particularly if you're a long-standing customer.
Option 2: Strengthen Your Financial Position
If you're not in a rush, this is the most powerful move you can make. Improving your financial profile doesn’t just increase your chances of loan approval—it also unlocks better interest rates and more options down the track.
Here’s where to start:
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Pay off or reduce existing debts, starting with high-interest ones.
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Avoid making multiple credit applications in a short period—they show up as hard inquiries and signal desperation.
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Build up a consistent savings record, even if the amount is modest.
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Check your credit report regularly for updates.
Apps like Frollo and WeMoney can help you track spending and identify patterns that may be undermining your financial health.
Option 3: Consider Non-Bank Lenders
When the banks say no, it’s worth exploring non-bank lenders, online lenders, or reputable loan matching websites like Friendly Finance. These providers often operate under different lending criteria and may consider things banks typically overlook, such as freelance income or alternative credit scoring models.
However, tread carefully—some non-bank lenders come with higher interest rates or less consumer protection. Check if the provider is licensed with ASIC, and avoid any lender that pressures you into signing on the spot.
Some reputable non-bank options include:
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Plenti – known for fair rates and fast approval for good-credit borrowers.
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MoneyMe – offers personal loans and lines of credit to those with thin or slightly damaged credit files.
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Nodifi or Wisr – used by brokers and sometimes offer more leniency on past credit issues.
Option 4: Explore Government and Community Support
If you were applying for a loan to cover essentials—rent, medical bills, car repairs—it may be worth checking if you're eligible for No Interest Loans (NILs) through organisations like Good Shepherd. These loans are available for amounts up to $2,000 with zero interest, fees, or charges, and repayment plans are tailored to your budget.
NILs are designed for people on low incomes who can demonstrate a capacity to repay but don’t qualify for traditional credit. They’re available through community partners and can be used for things like:
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Appliances
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Car registration
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Educational costs
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Health services
Option 5: Use a Licensed Finance Broker
Some borrowers assume brokers are just middlemen who push the same loans banks reject. That’s not the case—accredited brokers often work with a panel of lenders, including niche and specialist providers who might consider complex applications.
A broker will help
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Identify the right type of loan based on your circumstances
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Package your application to highlight your strengths
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Avoid repeated credit hits from applying to multiple lenders
Make sure they’re registered with ASIC and members of MFAA or FBAA. And don’t proceed with anyone who charges upfront application fees.
Option 6: Rethink the Need for a Loan Altogether
It’s worth stepping back and asking a hard question: Do I really need this loan right now, or are there alternatives I haven’t considered?
This could mean:
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Negotiating with utility providers or landlords for payment plans
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Selling or pawning non-essential items
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Asking for help from family or friends with a clear repayment agreement
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Deferring major expenses until you're in a stronger position
There’s no shame in pausing to regroup. It can save you years of financial strain.
Frequently Asked Questions
Can I reapply for a loan after being rejected?
Yes, but it’s wise to wait at least 3–6 months and address the issues that led to the rejection. Multiple applications in a short period can lower your credit score.
Does a rejected loan hurt my credit score?
The rejection itself doesn’t hurt your score, but the credit enquiry made during the application does. Too many in quick succession can be a red flag.
Should I use payday lenders?
Be very cautious. While easy to access, payday loans often come with extremely high fees and short repayment terms that can quickly trap you in a cycle of debt.
Is it better to get a secured loan?
If you have a vehicle or asset to offer as collateral, a secured loan may be easier to qualify for and offer lower interest rates. Just be aware that defaulting could result in the loss of your asset.
Loan rejection stings, especially when you need the funds. But it’s also a wake-up call—an opportunity to reassess, repair, and re-approach with a clearer strategy. Whether it’s reapplying with better financial footing, looking outside traditional lenders, or seeking community support, the key is not to give up.