Why Was I Declined for a Personal Loan?
Most common decline reasons
- Credit score below 650 on the Equifax scale (0–1,200)
- Debt-to-income ratio above 50%
- Payday loan or wage advance activity on bank statements
- Employment duration below the lender's minimum threshold
- An unpaid default on your credit file
Personal loan declines are almost always traceable to a specific, identifiable factor. The challenge is that lenders rarely explain which one applied. This guide walks through the most common causes — and the exact thresholds lenders use — so you can identify what applied to your application.
1. Credit score below the lender's threshold
Australian lenders use Equifax scores, which run from 0 to 1,200. The thresholds below reflect how most mainstream personal loan lenders classify applications:
| Score range | Likely outcome |
|---|---|
| 850–1,200 | Strong likelihood |
| 650–849 | Strong likelihood |
| 500–649 | Possible — lender dependent |
| Below 500 | Unlikely — needs improvement |
A score below 500 will result in a decline at most mainstream lenders — not because they do not want your business, but because their lending criteria require a minimum score. Scores between 500 and 649 are assessed case by case — the other factors in your application (employment, defaults, bank behaviour) determine the outcome.
Check your free Equifax score at equifax.com.au before running any calculation. How your credit score affects your approval likelihood →
2. Debt-to-income ratio above 50%
Your debt-to-income ratio (DTI) measures your existing monthly debt repayments as a percentage of your gross monthly income. The formula lenders use:
At a DTI of 50% or above, most lenders classify an application as Possible — lender dependent at best. Existing personal loans, car loans, credit card limits (at 3% of the limit per month, not the balance), and rent or mortgage all count in this calculation.
The credit card limit point surprises most people: if you have a $10,000 credit card limit, lenders count $300 per month as a committed expense — regardless of whether you use the card.
3. Employment duration below the minimum
Lenders apply different thresholds depending on how you are employed:
| Employment type | Strong likelihood | Possible |
|---|---|---|
| PAYG full-time | 3+ months | 1–2 months |
| PAYG part-time | 6+ months | 1–5 months |
| Casual | 12+ months | 4–11 months |
| Self-employed | 12+ months | 6–11 months |
| Unemployed | — | Always Unlikely |
Duration is counted in months in your current role — not overall years in the workforce. Casual and self-employed applicants who fall below the 4-month and 6-month thresholds respectively are classified as Unlikely — needs improvement.
See exactly what's affecting your application
Enter your income, employment, credit score, bank statement behaviour, and defaults to get a personalised assessment — and a ranked improvement plan.
4. Bank statement behaviour
Lenders review 3–6 months of bank statements for every application. Certain transaction patterns are treated as automatic risk signals — regardless of your credit score or income:
- Payday loans in the last 90 days — any short-term cash loan from services like Nimble or Cash Converters triggers a Possible — lender dependent classification, regardless of credit score.
- Wage advances in the last 90 days — services like Earnd or employer-facilitated payroll advance tools are treated identically to payday loans. No exceptions.
- High ATM withdrawals or gambling spending — if your combined ATM withdrawals, gambling, and crypto purchases exceed 25% of your net monthly income, lenders downgrade your classification by one level.
These are mechanical rules — not a character judgement. A specialist broker who knows which lenders apply which rules can make a material difference for bank-statement-driven declines. How lenders read your bank statements →
5. Buy Now Pay Later and existing debt
BNPL services — Afterpay, Zip, Klarna, Humm — are included in affordability calculations as a monthly expense. Unlike credit card limits, lenders use your actual monthly BNPL repayments, not a percentage of a limit.
BNPL does not appear on your Equifax credit file, which means it does not directly affect your credit score. However, it reduces your serviceability residual — the amount left over after all commitments are subtracted from your net income. If BNPL repayments cause your residual to drop below zero, affordability fails.
6. Defaults on your credit file
A default is a debt that was overdue by 60+ days and listed on your credit file. There are two types, and they have very different classification consequences:
Paid default → Possible — lender dependent
A settled default is assessed case by case. Some lenders will accept it; others won't. The age of the default and the amount matters. A specialist broker knows which lenders will consider your specific combination of default age and profile.
Unpaid default → Unlikely — needs improvement
An outstanding default will result in a decline at almost all mainstream lenders. If you are on an active payment plan, some specialist lenders may consider your application — but this is lender-dependent. Defaults age off your file after 5 years.
What to do next
- Get your free Equifax credit report and check for errors — errors can be disputed and corrected within 30 days.
- Wait before applying again — each application creates a hard enquiry that reduces your score. Space applications at least 3–6 months apart.
- Run the T3 assessment below to map your specific situation to the exact classification rules — and get a ranked improvement plan.
Common questions
How do I find out exactly why I was declined?
Lenders are not required to tell you the specific reason for a decline. Start with your free Equifax credit report at equifax.com.au — it shows defaults, hard enquiries, and repayment history. The Loan Approval Calculator can then map your specific combination of factors to the exact classification rules lenders use.
How long should I wait before applying again?
At least 3–6 months. Each application creates a hard enquiry on your Equifax credit file. Multiple enquiries in a short window signal financial stress to lenders and reduce your score. Use the waiting period to identify and address the specific factor that caused the decline.
Will a personal loan decline appear on my credit file?
The decline itself is not recorded — but the hard enquiry (the credit check the lender ran) is. It stays on your Equifax file for five years but does not indicate the outcome of the application. Other lenders can see that you applied, but not that you were declined.
What is the difference between a paid and unpaid default?
A paid default (a settled debt listed on your file) is assessed case by case — classified as Possible — lender dependent. An unpaid default almost always results in a decline at mainstream lenders — classified as Unlikely — needs improvement. Defaults remain on your Equifax file for five years from the date they were listed.
Related guides
This is general information only and not financial advice. Results are indicative and may vary by lender.