Why Am I Declined for Installment Loans?

An installment loan is a type of loan borrowers take out, and creditors expect them to make payments on every month. If the creditor declines an application for a loan, it suggests that they do not think the borrower can pay it back.

The two most common reasons for a declined installment loan application are low credit scores and low income.

Declined Installment Loan applications and Credit scores

Credit scores consider a multitude of factors to gauge an individual’s financial strength and reliability. There are small things, such as a missed payment, though, that can negatively impact it. For instance, if you have a late payment on an installment loan, creditors will be able to see that mishap for up to seven years.

Having a lack of diverse or extensive credit history can also work against your credit score. Creditors want to see that borrowers have received and paid back loans from multiple places, whether that is for a car, credit card, or mortgage. Furthermore, borrowing a small amount of money isn’t necessarily a con, though it may raise an eyebrow if borrowers request significantly more credit.

Low income is arguably the most straightforward reason for a creditor to decline an installment loan. They want to be confident that you can repay the loan, and if your income levels do not demonstrate that ability, you will be declined. High debt to income ratio can also be a problem. While low income is a hurdle, it is not a death sentence when getting a loan.

How to Build Credit

If you have low income, it typically means you will have to settle for less favorable terms. That may mean higher interest rates and more extended repayment periods. Borrowers can also work on building their credit score up to improve their conditions, which may involve any of the following:

  • Paying bills on time and in full
  • Dispute credit report errors in writing
  • Leverage the credit utilization ratio
  • Avoid maxed out credit card balances


Vivaan Marsh is a professional writer, editor and an expert in personal finance. Her career as a professional writer stretch for over 11 years. One of her passions in life is to help everyday families with there financial problems, making their life a bit easier and explaining complicated topics in an easy way. Read more >

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