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A loan is a type of credit in which a sum of money is lent to another party in exchange for future repayment of the amount borrowed and the accrued interest. Anyone can apply to get a loan but not everyone is entitled to get an approved loan and this may get them to ask why their loan application was denied.

This is not a gender, religion, race, or ethnicity factor.  There are some other factors that customers are not aware of because they are not aware of the reasons that can hinder them from getting their application approved.

This article is to expressly identify some factors that might be a blockage or hinder you from getting a loan. And also factors you should consider before you apply for a loan so that you do not get declined.

Applying for a loan takes a process that determines if the financial institution will disburse the loan to you or not. This process is when you are required to provide certain documents like your salary bank statement, work ID, government-issued ID, personal and employment details.

However, providing all these documents and other important information does not guarantee that your loan will be disbursed. Let’s take a look at some factors that can get your loan denied.

Loan denied

These are called predetermined criteria that guide us to know if you’re eligible for a loan or not.

1. Bad credit history

Your credit history is the primary way that lenders check if you have defaulted on paying back a loan in the past. If you have defaulted on repayment, you will be seen as a high-risk customer and you won’t get a credit limit. Providing your employment status or government-issued ID cannot help here, if your credit history is bad, your loan cannot be approved.

That is why it is essential that when you apply for a loan or a credit card and it is time to make a repayment, you make it at the appropriate time. Not only does it incur charges, but it also damages your credit history.

2. High debt-to-income (DTI) ratio

This compares how much you earn at the end of a month and how much of it you use to pay back loans. It is advised that you should not use more than 40% of your income to pay back any form of credit. Once we see that you are using more than 40% of your income, CredPal will not approve any credit limit for you. For example, if your monthly income is 150,000 Naira and you are using 105,000 Naira to pay back loans, which is 70% of your income, CredPal will not approve you of a loan.

3. You did not meet the minimum income requirement

If what you earn at the end of the month cannot pay back the loan you requested, it’s either your loan is not approved or you’re offered a lower amount. If you earn 100,000 Naira a month and you applied for a loan of 1 million Naira, that is likely going to take two years to pay back; the amount you requested will not be approved.

Also, If we’re unable to verify your proof of income or your income is below CredPal’s income requirement, you won’t be offered a credit limit. Another option here is that you might not get declined for the loan but you will be given a lower limit than you requested.

4. Inconsistent employment history

If your income is coming from different sources or you have recently changed jobs (in the last 60 days), or have freelance work from multiple employers, it may create an inconsistency in your income calculations and this could prevent us from offering you a credit limit. This is not to say that you can not be a freelancer or work on contract with different companies or brands, it simply says that you might get declined for a loan if you have an inconsistent employment history as a full-time employee.

5. You did not provide all the required information

As stated above, taking a loan takes a gradual process where you are required to provide some documents and necessary information that will help determine if your loan will be disbursed or not. Failure to provide these documents can get your loan denied. Make sure your documents are complete and accessible so you can use them when you need them.

There could be other reasons or factors as determined by your financial institution. Financial institutions always give reasons for disapproval so that you are not kept in the dark wondering why you were declined even after providing all the necessary information and documents.



In the wake of minimal access to loans, we are driving a lending ecosystem that increases the purchasing power of consumers and economic growth across Africa by offering better and easier access to consumer credit through credit cards, buy now, pay later, and loans.

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