Applying for a personal loan without right deliberation may result in its rejection. Understanding why your loan application was/may be denied helps you out next time you attempt to qualify for the loan. Here are the common reasons why your personal loan could have been rejected.
Multiple Loan Enquiries and Applications
There are various personal loan lenders. After enquiring about them you may often end up applying with multiple lenders. Important factor to consider is that, every time you apply for a personal loan in India, the financial institution makes an inquiry to your credit score. This is done with the Credit Bureau and examines your credit score. The credit score bureau takes those as difficult inquiries. They mentions it on your credit score report, which may create a negative impact.
To avoid rejection of this loan due to this reason, compare options across various personal loan lenders. There are various platforms available on the internet for this.
Higher Existing Debts
Another reason for loan rejection is when you have higher prevailing debts. If you presently have too many open credit accounts, which include credit score cards and loans, your potential lender will take into account that you are overburdened with credit score. This may end up in default. Your excessive money owed makes you stand at risk in the eyes of the lender. This may also result in your personal loan rejection.
Ensure that you borrow loans and credit cards as consistent with your repayment capability, and only when required. Avoid availing more than one loan in case you can’t pay them feasibly. Further, even when you have borrowed more than one loan, maintain a clean record. Then make sure that the ratio of secured to unsecured loans is balanced.
Low Credit Score
Credit rating is a number between 300 and 900, which essentially displays your creditworthiness and therefore, performs an essential position in a lender’s choice to provide out a loan. Typically, creditors have a threshold credit score rating for sanctioning a personal loan. If your credit score rating is beneath this threshold, you’ll no longer get the loan. Applicants with no credit score rating may also face rejection, as without credit score history, your lender will have no manner to evaluate your financial habits.
Usually, a credit score of 750 and above is taken into consideration best for loan approval. If your credit score rating falls underneath it, enhance it with proper practices. Besides credit score rating, alternatively, you could approach NBFCs or personal loan app as they have a lower credit score rating requirement than banks. However, NBFCs levy a higher personal loan interest rate in comparison to banks. If you haven’t any credit score history, approach a lender with whom you’ve got a salary account or existing relationship. Another option that you could attempt is making use of a secured personal loan such as a loan against fixed deposit.
Income Criteria Not Met
Before giving out a loan, lenders need to make sure that they may get it back on time. To make sure well timed repayment of the loan, lenders examine the applicant’s profits. Sufficient and solid profits indicate that you may be capable of paying off all of your EMIs on time. This is the reason why it’s far less difficult for salaried personnel to avail a personal loan, in comparison to self-employed, as salaried personnel have constant income and sources. Generally, most of the creditors have defined a minimum income requirement for salaried and self-employed and when you have applied for a personal loan amount, that is greater than your eligibility, then the chances of loan rejection is higher.
It is always better to calculate your eligibility as per your income before applying for a loan. Most of the banks and financial institutions provide personal loan eligibility calculators on their website.
Unstable Employment History
Your career and employment details play an important role in personal loan approval. Lenders prefer lending loans to individuals working in reputed organizations. So, if the business enterprise you’re running for is unregistered or now no longer-listed, your application may get rejected. Further, most banks provide this unsecured loans to people who’ve a solid record of employment. If you no longer have a solid history of employment or have a history of quitting jobs more than one time, your loan application is likely to be rejected. Most banks need a client with solid employment or business and an everyday income. People changing jobs at regular intervals are considered as less creditworthy to get loan approvals or the provided personal loan interest rates will be higher.
Generally, lenders expect that you have a minimum work experience of at least three years, with that of at least one year in the current organization. Ensure you maintain a good employment record.
Your personal loan application is approved most effectively after your files are verified. If a file is lacking or there’s an inconsistency of data on your files, your lender will reject your application. Similarly, your personal loan application form is essential as different documents you upload in along with it. Details given on your personal loan along with your name, age, income, address are essential for lenders to generate vital information about you. If lenders discover inaccuracies in any of those or different information cited on your application, your loan request can be rejected.
To avoid this, check the documents required in advance and be organized with those in advance. If you’re applying for a personal loan online, hold scanned copies of all documents, and in case you are making use offline, take along with originals with required copies. Also, make sure that your documents are in a good condition. When it comes to your application form, fill up the info cautiously and mindfully.
When a personal loan application is rejected once, it is recorded on your credit score report, leading to further inability to borrow new funds easily . It is recommended to maintain the above stated matters in mind, and observe best while you apply for personal loan. If you experience something which lacks any of the parameters, it’s better to improve that factor before applying it.