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OurTips-P2P-Investing-OurMoneymarket 5 Reasons You Get Declined After Clicking Apply For Personal Loan

Have you clicked “Apply for Personal Loan”, completed the whole form, provided the necessary information, only to be rejected and never really been sure why. Below is a list of the most common reasons why you’ll get rejected for a personal loan.

#1 Credit Enquiries

If you’re not sure what a credit score is take a quick read of our previous post “5 Simple Ways to Improve Your Credit Score”. A low credit score can have a big impact on your chances of getting a personal loan and one of the biggest causes for a low credit score are the number of recent credit enquires you’ve made. Too many credit enquiries in a short period of time will have a negative effect on your credit score as it gives a perception of financial desperation. While it can be tempting to shop around for the best deal, or quick money, make sure you’re careful not to rack up credit enquiries. Having multiple applications on the go, then picking what you perceive to be the best one might seem like a good idea but ultimately, it’s going to lower your credit score and can have serious implications on your ability to access credit in the future. Instead, do your research before applying and then when you’ve found the lender that suits your needs proceed with the application.

#2 Income Type

Income is another common reason so many people are knocked back in credit applications. Income can be a complex beast as it can come from a number of different sources. Before applying for credit always ensure the income you receive is income that can be verified. That is to say you need the relevant documents to make sure you can prove that it is your income and that it is taxable income. Furthermore, even though you may earn income, is it a type that is acceptable to lender you are applying with? There are types of income (e.g. centrelink benefits) that some lenders will not accept, so be careful if a large part or all of your income comes from social security benefits, foreign income or investments. Ask the lender before you apply if your source of income is acceptable. If not, then you have saved your file against another credit enquiry.

#3 Employment Type

The type of employment you have can also have an impact on your chances of getting a loan. Lenders generally consider permanent full time or permanent part time borrowers safer to lend to than say casual, contractors or self-employed borrowers. This is due to the fact they receive a set minimum number of hours and are also guaranteed annual and sick leave. A casual customer on the other hand will have hours that can fluctuate and if they need a holiday or the day off due to sickness they unfortunately don’t get paid!

Furthermore, some online personal loan lenders will require you to be in your employment for a certain period of time before it can be accepted. It is always a good idea to check if there is a minimum period of employment required for your loan to be accepted. In particular casual employment and self-employment often have more stringent rules around length of employment due to this income source being considered less predictable.

#4 Default

While some people will receive a default on their credit file due to circumstances out of their control, such as financial hardship, others will receive theirs from situations that are entirely avoidable! A common source of defaults are disputes over phone bills and energy bills. You receive your bill in the mail and much to your shock it’s triple the usual amount. You call the company but they just won’t listen. In anger you decide you’re not going to pay it. You close your account and move to a competitor. The company sells your debt and you get a default on your credit file that will take at least seven years to get removed! Now every time you apply for credit this stops your application from being approved. While it can be painful to have to pay a debt you believe to be unjust its better for your credit file if you pay it, then dispute it, and try to get the money back

#5 Lack of Transparency

Be honest when you go to a lender. Dishonesty will get you nowhere. If you are hiding credit cards from the lender they’ll find out about it. If your repayment history is bad let them know as they may be able to advise you before a credit enquiry gets submitted on your credit file whether it’s worth your time applying. If you’re honest about your circumstance the lender may be able to put in place a finance solution that gives you what you need and makes your overall financial circumstances easier. If a lender finds out you’ve been lying during your application then they will decline you on the spot.

In Summary

So next time you consider pushing that “Apply for Personal Loan” button, be sure to put yourself in the best possible position to be approved. If you follow the above advice you’ll certainly give yourself a better chance of preserving your credit score and finding a loan suitable to you and your circumstances.

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money-4 What is a Personal Loan?

What is a Personal Loan?

A personal loan is a cash advance provided by an online lender, like OurMoneyMarket, or a bank, which can be used for any kind of personal expense. For example, paying off debts, preparing for a wedding, buying a new car, renovating your home etc.

How do personal loans work?

Personal loans are pretty similar to home loans, in so far as, you make regular repayments of principal and interest to the lender until the total loan amount you borrowed is fully repaid. The difference between a home loan and a personal loan however is that with a personal loan the lender will typically transfer you cash so that you can purchase whatever it is you need.

Are there different types of personal loans?

There are basically two types of personal loans; (1) a secured personal loan; and (2) an unsecured personal loan.

Secured Personal Loans: This is a cash loan that is secured by some kind of asset, such as a car, motorbike or boat. If you fail to meet your repayment obligations on the loan the lender is able to repossess the asset you pledged as security for the loan (i.e. the lender can take the asset away from you). Given you have provided a form of security to the lender the interest rates on secured personal loans are lower than unsecured personal loans, as the risk to the lender is lower.

Unsecured Personal Loans: This is a type of cash loan in which you don’t provide any security towards the loan. Usually convenient for those borrowers who aren’t purchasing an asset that can be pledged as security (i.e. the loan is for debt consolidation) or the borrower doesn’t own any large financial assets (e.g. car, boat etc.) and therefore can’t offer the lender any security. As the borrower is offering no security the personal loan interest rates for unsecured personal loans are higher than secured personal loans. This does not however mean that if a borrower fails to repay an unsecured personal loan that they can walk away from their debt. The lender can typically obtain a court judgement to either repossess any assets the borrower has or alternatively garnish the borrower’s wages, amongst other things.

Personal loans can either have a fixed rate or variable rate. What’s the difference? A fixed rate means that as a borrower you have a fixed interest rate and fixed repayment for the life of the loan term. That also means there are no nasty repayment surprises. A variable rate means that the interest rate on the loan can change over time. This means that your loan repayment may go up or down over the course of the loan. OurMoneyMarket only offers fixed interest rate loans.

How do you get a personal loan?

If you’re wondering how to get a personal loan rest assure there are a range of online personal loan lenders available to you, though if you would like to apply for personal loan now click here. The process is 100% online and takes approximately 5 to 10 minutes to complete the application form. To be eligible for an OurMoneyMarket personal loan you will need to meet the following criteria:

  • Be 18 years or older;
  • A permanent Australian resident or valid visa holder;
  • Earn more than $25,000 a year (after-tax); and
  • Demonstrate steady employment (whether casual, part-time, full-time, contract or self-employed) or be on the pension.
  • Looking for a personal loan? Click here to get started or alternatively call 1300 990 115 to speak with one of our friendly customer service representatives.

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    Source: OurMoneyMarket Lending Pty Ltd ABN 64 605 231 669 Australian Credit Licence 488228.

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