5 Reasons Why Your Personal Loan Application Was Rejected

Written by Shannon Wong on July 5, 2022

Getting a personal loan in Singapore is actually pretty common. Financial emergencies may occur at any time and we might need some extra financial support for our needs. Sometimes, you might need to borrow money to clear your credit card debt, for your school fees, for a vacation with your partner or even a home renovation.

No matter the reasons, you might have faced problems getting your personal loan approved. “Why was my personal loan not approved?”

Your lender can be a bank or a licensed money lender in Singapore. First, you need to look at things from their perspective. Before approving a personal loan, they will need to consider the risk of lending out their money to any borrower. They will be thinking:

“How much money will I lose if my client fails to pay on time, or defaults on his loan?”

“How much risk exists for this client?”

These are the standard questions and evaluations they must go through.

You have to understand that financial institutions in Singapore (banks and licensed moneylenders) will go through this risk assessment for any individual who is applying for personal loans. For the risk assessment, they might ask their customers for their CPF statements, employment history, income records and more. This helps them to evaluate the lending risk for each customer.

Not all financial institutions are the same. Each lender will have their own set of rules and regulations depending on their ability and business model. While some might be more lenient, there are still a few common factors that loan officers will surely look into when they’re reviewing your loan application.

What Are the Reasons My Personal Loan Application Was Not Approved?

Getting your personal loan application rejected can feel like a harsh blow. However, understanding the root causes is essential to finding practical solutions.

1. Bad Credit Score

When you apply for a loan, the first thing lenders look at is your credit score. If your score is low, there’s a good chance to get your personal loan rejected.

Why is that?

  • Banks in Singapore want to see that you’re a responsible borrower. A low credit score indicates that you may not be able to make your loan payments on time.
  • A bad credit score equals a high risk of defaulting on your loan.

In order to get a fast cash loan, you need a flexible money lender that is less restricted by bureaucracy.

2. Bad Credit History

Bad credit history might get your moneylender loan rejected because it indicates to the lender that you’re not good with money. If you can’t handle your finances responsibly, then the lender doesn’t want to risk loaning you money that you might not be able to repay.

Having a bad credit history means that there is a higher chance of you defaulting on your loan.

3. Unstable Employment

If you’ve ever been told that your employment status is “unstable,” and that’s why your loan application was rejected, you’re not alone.

It’s a common issue that many Singaporeans face, but it can be easily overcome.

Unstable employment history can be an issue for lenders because it indicates a higher risk of default. In other words, if you’ve had a lot of jobs in the past, it’s more likely that you’ll lose your current job and have trouble making your loan payments.

Here’s the solution:

Many people with stable employment histories have also lost their jobs and struggled to meet ends. The key is demonstrating to lenders that you can manage your finances and make regular loan payments, even if your employment situation changes.

1AP Capital has helped many freelancers or borrowers with unstable income with our easy-apply personal loans.

4. High Debt to Income Ratio

This ratio measures how much debt you have relative to your income, and it’s one of the key factors that lenders consider when evaluating a loan application. A high debt-to-income ratio indicates that you carry a lot of debt relative to your income, making it difficult to repay a loan.

Lenders typically prefer to see a debt-to-income ratio of 36% or less, even though the current TDSR in Singapore is 55%.

So if yours is higher than that, it may be one reason for getting your personal loan rejected.

To improve your chances of getting approved for a loan:

  • Increase your income, or:
  • Pay down some of your existing debt.

However, if your debt-to-income ratio is still high, you may need to consider other financing options.

5. Not Enough Credit Information

Most Singaporeans know that a good credit score is essential for getting their loans approved.

Here’s what many don’t realise: A lack of credit information can also lead to a loan rejection.

Lenders use credit reports to determine whether an applicant will likely repay a loan. If an applicant lacks a credit history, it’s difficult for lenders to assess their risk. As a result, many lenders will simply reject any loan application that doesn’t include enough credit information.

So if you’re hoping to get approved for a loan, build up your credit history first. Otherwise, you may find yourself being turned down for financing.


How Can I Get My Loan Approved?

Now that you know why a personal loan can be rejected, let’s see how you can get yours approved:

1. Improve Your Credit Score

Your credit score is like your report card from the financial world. A high score means you’re managing your finances well, while a low score indicates there’s room for improvement.

Having a bad credit score is also not the end of the world.

So how can you give your credit score a boost?

  • Pay your bills on time. Payment history is the most significant factor in determining your credit score, so staying on top of your payments is essential.
  • Keep your balances low. Having a high balance on your credit cards can hurt your score, so it’s best to keep your balances below 30% of your credit limit.
  • Use a credit monitoring service to track your score and spot any potential problems.

2. Reframe Your Employment Status

As mentioned earlier, lenders are often reluctant to approve loans for people with unstable employment histories. If you’ve had a lot of jobs in the past, it can be challenging to convince a lender that you’re capable of repaying a loan.


  • Get referrals or testimonials from your previous employers. If you show you’re good at your job, you can prove you’ll always be employed – even if you constantly change workplaces.
  • Include all income sources in your application (including rent, alimony, investments, etc.).
  • Consider a steadier job for a few months before applying again.

3. Pay or Restructure Your Debts

If you’re hoping to get approved for a loan, one option is to try to pay down your existing debt. This will lower your debt-to-income ratio and make you a more attractive borrower.

That’s not always feasible.

Another option is to restructure your debts.

If you have a lot of high-interest debt, such as credit card debt, you may save money by consolidating your debts into a single loan with a lower interest rate. This can make it easier to repay your debts and improve your chances of getting approved for a loan.


How To Borrow A Larger Loan Amount?

Sometimes getting your loan approved isn’t the only end goal. You may also want to access a higher sum for urgent financial needs. Consider the solutions below:

  • Start with a smaller loan and repay it timely. This strategy shows your lender that you can handle the financial responsibility.
  • Secure a loan with a cosigner. A cosigner is someone who agrees to repay the loan if you default, which can make lenders more willing to approve your loan.
  • Use collateral. If you put your assets as collateral, the lender knows they’ll get their money back eventually. So, they’re more likely to lend you the sum you need and with lower interest.
  • Get a loan from a licensed moneylender specialising in loans for people with bad credit. 1AP Capital, for instance, believes that everyone is worth a second chance. So even if you have a bad credit score, we’ll customise the right solution for your needs.

It can be frustrating when you need money quickly and your bank won’t help.

We know it can be hard to get a personal loan, but don’t worry; we’re here for you.

1AP Capital offers fast personal loans to those with bad credit or are looking for short term loans. You may choose to apply online or via Singpass, or visit our physical shop that is 3 minutes away from Tanjong Pagar MRT.

Highly reviewed by our customers, we can help you borrow money quickly.

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