If a loan application is denied after a down payment has been made, the borrower should first contact the lender to understand the specific reasons for rejection. Reviewing and disputing any errors on their credit report is critical, as 25% of consumers in the U.S. have inaccuracies that can impact approval. If the denial is due to insufficient credit history or income, exploring alternatives like a co-signer or adding assets to the application may help. Selling the purchased asset or seeking a refund from the seller for the down payment (if applicable) is another option. Additionally, applying for a personal loan or credit line to cover immediate expenses might provide flexibility while reapplying for the original loan later.

The denial often stems from factors like credit score fluctuations, incomplete documentation, or sudden changes in the borrower’s financial status. According to the Federal Reserve’s 2023 report, 40% of loan rejections occur due to credit score issues, while 30% involve documentation problems. For example, a 2022 study by the Consumer Financial Protection Bureau found that 18% of applicants who paid a down payment but were denied later successfully re-applied after correcting credit report errors or securing a co-signer. Personal loans, such as those from banks or credit unions, offer an alternative with approval rates averaging 60-70%, per data from the National Association of Consumer Credit Administrators. Selling the asset outright or negotiating a refund with the seller can mitigate losses, though this depends on the purchase agreement. Proactive communication with the lender and addressing specific denial reasons significantly improves the chances of future approval.