Why It Can Be Difficult to Get a Bank Loan

Before issuing loans, banks carefully assess their risks. They evaluate each borrower’s solvency and reliability, as well as the overall economic situation. For lenders, it’s crucial that the client can meet their obligations and repay the debt. Typically, there are three main reasons for refusal.

1. Poor Credit History

If you have outstanding overdue debts on other loans or borrowings, the bank is unlikely to approve a new one. It becomes clear that you are struggling to manage your obligations — which means you probably won’t make payments on time under a new loan either.

Even if your late payments occurred long ago, it’s still a red flag for the bank. It may indicate that you don’t plan your budget well enough to manage your financial commitments. Usually, banks assess payment discipline over the past one to two years, but in times of crisis, they might look further back.

Banks can also check whether you have other unpaid obligations — for example, overdue taxes, utility bills, or alimony. Even if you pay your loans on time but delay other payments, the bank may still view you as an unreliable borrower, which significantly increases the likelihood of rejection.

2. High Debt Load

Banks pay close attention to what portion of your monthly income goes toward debt payments — in other words, your debt-to-income ratio.

Ideally, your total debt payments (including the loan you are applying for) should not exceed one-third of your income. In that case, even if you experience minor financial difficulties, you will most likely still be able to make payments on time.

When the debt load exceeds 50%, it becomes difficult to keep up with payments in the event of temporary issues, such as job loss. And if your debts consume more than 80% of your income, even a short delay in your salary could disrupt your entire budget, making late payments almost inevitable. In such circumstances, a bank is unlikely to risk lending you money — especially a large sum.

3. Unstable or Unverified Income

The lender needs to be confident that your income source will not disappear. Generally, banks refuse loans to people who have changed jobs less than six months ago or cannot provide official proof of income.

In more stable times, banks might have accepted alternative evidence of income, such as a bank statement showing regular deposits. But when the economy is unstable or unpredictable, lenders prefer to avoid unnecessary risks.

Even if your payment discipline is solid, your debt load is low, and you have steady employment and income, be prepared for the bank to offer you a smaller loan than requested — or to extend the loan term to reduce monthly payments. This is also a way for the bank to minimize its risks.

As the financial and economic situation in the country stabilizes, banks are likely to gradually ease their lending requirements for borrowers.