What are the some common reasons for Personal loan rejection

If you apply for a personal loan without thinking about it, you can get turned down. Understanding why your loan application was/could be declined will assist you the next time you apply for a loan. The following are the six most prevalent reasons why your personal loan application was denied.

1. Poor credit score : To assess a customer’s creditworthiness, all banks and finance organisations look at their credit score rates. Because a personal loan is unsecured, lenders rely on your credit score to determine whether or not to lend. Leading Indian banks would only approve your loan if you have a CIBIL score of 700 or above. To keep a strong credit score and lower the possibilities of loan rejection, make sure to pay all credit bills and EMIs on time. 

2. Occupation :  For salaried borrowers, the rate of interest offered is determined by your designation and company profile. The larger and more reputable the organisation you work for, the greater your chances of getting the loan granted. Banks regard profession and business continuity to be crucial criteria in determining your repayment capacity, and an inconsistent work history can harm your approval chances.

3. Inadequate Eligibility : Lenders examine your monthly income to see whether you will be able to repay the loan. You would also be needed to present income documentation to prove your eligibility. If you do not fulfil the lender’s income standards, your application will most likely be denied. Calculating your loan amount eligibility and applying for a loan amount that you are likely to be eligible for can help you secure a loan.

4. High loan balances : If you haven’t been paying down your loan balances or are utilising too much of your available credit, your application is likely to be denied. Reducing your loan balances and only using a percentage of the available credit can help you get accepted.

5. Inaccurate Details in Application : If your name, address, phone number, and other account information are incorrect, it will be impossible to create the necessary information on you. Banks will not approve your personal loan if you do not provide the necessary details.

6. Age : Personal loans are often made available to adults between the ages of 21 and 60. If you are too young or too old, your chances of getting a personal loan are better and on a good Personal Loan Interest Rate. Furthermore, they are typically supplied to consumers that have a steady source of income.

7. Unsecured Loans : When applying for a personal loan, the ratio of secured and unsecured loans is quite important. The presence of more current unsecured loans than secured loans diminishes the likelihood of your personal loan application being approved.

8. Multiple inquiries : A section of the credit report highlights all loan queries by the prospective borrower. Multiple and parallel credit queries within a short period can further increase chances of loan application rejection. It reflects the desperation to get a loan and your inability to get a loan from other banks.

A personal loan keeps you prepared for financial downturns, but it’s also crucial to be able to get one. If your personal loan application is denied once, it will be reported on your credit report, making it more difficult for you to borrow money in the future. It’s best to keep the aforementioned considerations in mind and apply just when you’re confident that your loan application will not be denied. If you believe you are lacking in any of the parameters, you should first improve before applying.