An MFI is not required to explain the reason
In most cases, the decision on an online loan is made automatically using a scoring model. An MFI usually does not disclose the specific reasons for rejecting a borrower’s loan application.
At the same time, this does not mean that a lender may reject an application “for no reason.” Article 10 of Law No. 1734-VIII requires a lender to assess a consumer’s creditworthiness before entering into an agreement, but it does not establish a requirement to disclose the result. The assessment takes into account, in particular, the borrower’s income, information about the fulfillment of previous credit obligations, existing debts, and other factors.
Only after the full assessment does the system make a decision based on the estimated risk of non-repayment.
Main reasons for loan rejection
The factors that most often affect why a loan is not approved include:
- Problematic credit history. Overdue payments and other negative records are taken into account when assessing creditworthiness.
- High debt burden. If a person already has several loans, the lender assesses whether they will be able to service the new debt.
- Low or unverified income. If income is insufficient to repay the loan, or there is no information about it at all, this negatively affects the decision.
- Failure to meet age requirements. Each MFI may set its own age limits.
- Being listed in the gambling register. The law restricts lending to persons for whom the register contains information about the use of borrowed funds for placing bets.
- Errors in the application form. Incorrect passport details or other discrepancies make automatic verification impossible.
- A large number of applications in a short period. Scoring models usually treat frequent loan requests as a sign of low creditworthiness.
What to do after a rejection
- Check your credit history. If a lender rejects your application, you have the right to submit a free request to check your credit history (Article 13 of Law No. 2704-IV). If the information contains inaccuracies, you may request that they be corrected.
- Pay off overdue amounts if possible. Existing unfulfilled obligations affect the creditworthiness assessment.
- Apply for a smaller amount. A smaller amount means less risk for the lender.
- Try another MFI. Different lenders may use different internal criteria to assess applications.
- Do not submit more than 5 applications per day. This may signal low solvency to the lender.
FAQ
Can I reapply after being declined?
Yes, you have the right to apply again. However, before submitting a new application, it is worth considering whether the circumstances that may have affected the previous decision have changed.
How soon can I apply again?
There is no waiting period established by law. The specific rules vary by lender.
Does a rejection affect my credit history?
A rejection in itself does not negatively affect your credit history. At the same time, scoring may take into account a large number of applications submitted within a short period when assessing creditworthiness.
Final summary
A loan rejection is not necessarily final. An MFI’s decision is influenced by various factors, some of which can be addressed. For example, you can clarify information in your credit history, repay overdue debt, or reconsider the amount you need to borrow.
Important to know: The information in this article is for informational purposes only and does not constitute financial or legal advice. The recommendations on what to do after a rejection are provided solely for a general understanding of the situation and do not guarantee that a subsequent application will be approved or that a loan will be obtained.
