Bank Loan Declined: What to Do Next (Complete Action Plan)

Being declined by a bank is frustrating, but it's not the end. Here's your complete action plan for what to do next.

Step 1: Understand WHY (First 24 Hours)

Request Formal Decline Reason:

• Call the bank immediately
• Ask for specific decline reasons (in writing)
• They must tell you under credit laws

Common Decline Reasons:

• Credit history (defaults, late payments)
• Insufficient income
• High existing debts
• Employment type (casual, contract)
• Property type (rural, unit)
• Loan purpose
• Policy changes

Step 2: Get Your Credit Report (Day 1-2)

Order free credit reports from:

• Equifax (equifax.com.au)
• Experian (experian.com.au)
• illion (illion.com.au)

Check for:

• Defaults you didn't know about
• Incorrect information
• Identity theft
• Too many credit inquiries

Dispute errors immediately

Step 3: Assess Your Options (Day 2-7)

Question 1: Can you fix the issues?

• Paid defaults: Wait 12-24 months, try again
• Improve income documentation
• Pay down debts to improve ratios
• Change employment (if casual)

Question 2: How urgent is your need?

• Not urgent: Fix issues, reapply in 6-12 months
• Urgent: Explore alternatives now

Question 3: Do you have property equity?

• Yes: Private lenders viable option
• No: Limited options (guarantor, co-borrower)

Step 4: Explore Alternatives (Day 7-14)

Option 1: Different Bank

Try if:

• Decline was borderline
• Different bank has different policies
• You can address specific concern

Risk: Another decline = another inquiry (hurts credit)

Option 2: Non-Bank Lenders

Try if:

• Near bank criteria but with some issues
• Minor credit impairment
• Self-employed

Examples: Pepper, Liberty, Bluestone Rates: 6.5-12% p.a.

Option 3: Private Lenders

Try if:

• Credit issues
• Urgent need
• Complex situation
• Have property equity

Rates: 7-18% p.a. Approval: 7-14 days

Option 4: Guarantor

Try if:

• Parent/family can guarantee
• Would make loan viable
• Bank agrees to reconsider

Option 5: Wait and Fix

Try if:

• Not urgent
• Clear path to fixing issues
• Can wait 6-24 months

Step 5: Take Action (Day 14+)

If going alternative route:

1. Get 3+ quotes from suitable lenders
2. Compare total costs
3. Check lender credentials (ACL)
4. Get legal advice on contracts
5. Proceed with best option

If waiting to fix:

1. Create timeline for improvements
2. Set specific goals
3. Monitor credit regularly
4. Engage mortgage broker when ready
5. Reapply when criteria met

Common Mistakes After Bank Decline

DON'T: Apply to multiple banks rapidly (hurts credit) Hide the decline from next lender Accept first alternative offer without comparing Give up (alternatives exist!) Pay large upfront fees before approval

DO: ✅ Understand specific decline reason ✅ Target right alternative lenders ✅ Compare multiple options ✅ Fix underlying issues if possible ✅ Use broker/platform to avoid multiple inquiries

Bank declined you? Explore alternatives: Connect with alternative lenders.