A Personal Loan is your best option in cases where there is an immediate need for funds. At times like this, if you apply for a Personal Loan and get rejected, it can be a cause for stress. No one likes to face rejection. Therefore, it is essential to know the reasons for which a Personal Loan can get rejected and take the required precautions to avoid rejection.
Personal Loan Rejection Reasons
One of the most common reasons why your loan can be rejected is if the total revenue of the house is not enough. Any lender would want to only give credit to someone who would be able to pay it back comfortably along with interest. If you can conveniently pay the EMI (Equated Monthly Instalment), then it is more likely it is that your credit would get approved. However, if the monthly EMI is Rs. 15,000 and your salary is only Rs. 20,000 per month you may be facing rejection. Most institutes would also take into consideration any loans that you currently have. If you are already paying an EMI, your income is lowered which would make it that much harder for you to get a Personal Loan.
Low credit score
Your credit score is a record of your credit history. No institute wants to give money to someone who does not have a good record of paying back the loan. If you have skipped EMIs or defaulted on a loan, there are chances that your credit score can be lowered. Your credit score is also affected if you pay your bills late. A credit score of above 700 is considered to be ideal if you want to apply for a Personal Loan.
Too much loan in a brief period
If you have already borrowed money in the past year, it may affect the probability of you getting another loan. Most lenders are hesitant to provide a loan to someone who had already availed a loan previously. However, each institute has their policy regarding this hence it is possible to get a Personal Loan with some institutes even if you have already taken a loan.
Previously rejected loan applications
A loan application that was denied once could lead to the rejection of any other loans unless there is a drastic change in the credit score or repayment history of the individual.
A lender would verify every aspect that is provided on the application form. If they find that the borrower has provided them with false information they have a strong reason for rejecting the loan. This is why you should recheck all of the details that you are providing on the form.
Comments in credit score
Along with your numerical score, the report also contains comments and remarks from previous banks or non-banking financial companies (NBFCs). Any negative comments can also result in the rejection of your loan.
Being guarantor on a loan that was defaulted
If you stand guarantor for a loan, you are as responsible for the paying back of the credit as the borrower. In the event of a defaulted loan, your score would also be affected. Which could also result in your loan getting rejected.
Steps to Avoid Rejection
Check the credit score
Now that you can also Apply for a Personal Loan Online most requirements are also readily available online. Verify if you match these requirements could help avoiding rejection. You can also ask the lender before you go ahead and apply for the loan.
Verify the minimum income amount
Every lender has their minimum income requirement. Checking these requirements and find a lender where you would qualify for the loan.
Make sure that the purpose of your loan is allowed
Most loans have restrictions when it comes to how you can use the loan. Although personal loans rarely have any restrictions for use, it is better if you verify this before you apply for the loan.
Verify your details
Before you submit your application form, it is best to double check all the features that you have provided to avoid any reason for rejection of the loan.
Do not apply for more loans than you can handle
Although it is very tempting to apply for a loan of a higher amount than you need, this could be a reason for your loan to get rejected. A lender would only give a loan to someone they think would be able to repay the loan. If you have many loans, no lender would want to provide you with more.
Check the employment requirements
Most lenders need you to have a steady source of income for a specified period before you apply for the loan. Knowing this requirement could help you ensure that you meet the requirements before applying for the loan.
Now that you know the reasons why your Personal Loan can get rejected and how you can avoid this scenario you can go ahead and apply for the personal loan of your choice.
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