Personal Loan Rejection
Has your personal loan application ever been denied? We know an application rejection is not a good experience, more so when you are financially strapped.
Even with a good credit score and all the required documents in place, a personal loan application can still be rejected as there are many other factors that are taken into consideration as well. In order to maximize your chances of personal loan approval, let us first understand the factors that can contribute to a rejection.
Here are 7 reasons which may lead to the rejection of your loan application despite having of a high credit score
- You are in too much of debt
When you apply for a personal loan from any bank or NBFC, they look at your credit score including your credit history. Although you might have a good credit score and a spotless record at EMI payments, if you have too many active loan/credit accounts, it shows that you are not good with credit.
This sends an impression to the lenders that in case of emergencies, your income might not be adequate to pay off your debts. This can lead to your personal loan application being rejected despite having a good credit score.
- Your income is less
When it comes to income of an applicant, every lender has specific criterion with respect to the minimum net monthly income of a suitable applicant in order to qualify for a personal loan. Even if your credit score is great, if your income does not fall in the eligibility criteria, your application will be rejected.
Apart from this, your debt to income ratio needs to be inside a set/ pre-defined bracket. If you do not meet the debt to income criteria, your loan application can be denied.
- Applied too soon since last loan
Lenders and financial providers look at your loan application frequency in your credit profile and judge your lending behaviour accordingly. If you applied for a new loan too soon after getting the previous loan, this can lead to your loan application being rejected.
This does not mean you have too much credit but lenders take your discipline regarding credit repayments in account.
- Your credit report has incorrect information
This is one of the most common reasons for a loan application to be rejected. Though you might have closed your old credit cards or pre-paid all your existing loan accounts, but if that information is not reflected in your credit report at the time of loan application, your application can be rejected.
- You have been at your current job for less than required time
All lenders have laid down specific criteria for minimum time required at the current job at the time of loan application. If you do not meet the criteria while applying for the loan, your loan application will be rejected.
Lenders prefer an applicant with a minimum of 3-6 months’ work experience in the current job. If you’re applying for a loan after starting a new job, make sure you complete the minimum time period as mentioned in the criteria.
- You were involved in a credit card default
Lenders at your detailed credit history and consider incidents from as long as 7-10 years. If you have defaulted on a credit card/loan payment in this time, your loan application will be rejected.
Even if you’ve been regular with all the bill payments thereafter, one defaulter incident is enough to get your loan application rejected.
- You’ve applied for loan at multiple places
If you have applied for a loan with multiple lenders at the same time, chances are that the first or second lender might approve your loan application but thereafter, your loan application will get rejected.
Applying at too many places at the same time shows you are in deep financial trouble and this is a major red sign while evaluating your loan application for the lender.
Though the application itself doesn’t affect your credit score in any way, but rejections thereon, on your credit profile, will have more adverse effects.
These are the common reasons behind a loan application rejection. If you are applying for a personal loan, make sure you consider these factors and fix them to maximize your chances to get an approval.
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