More than 78% of credit requests in India fall into this category. Many prospective borrowers pick these loans because they are unsecured.
To meet various demands, banks and other financial organizations offer a range of loans.
Technology has enabled the loan application process to be expedited and enhanced over time. Individuals can have simple access to loans now.
The Personal Loan is the most prevalent lending product in IMost frequent arguments for rejecting personal loan applicationsndia’s debt market.
The most common reason for rejecting personal loan applicationsndia’s debt market is the Personal Loan.
Now let’s examine the usual reasons for personal loan refusal in more detail:
- Having Poor or No Credit Score
Your credit score, which runs from 300 to 900 and effectively symbolizes your creditworthiness or financial health, has a big impact on whether a lender decides to provide you with a loan.
Lenders often need a minimum credit score before approving a personal loan.
One of the many causes of loan denial may be the most notable. If your credit rating is below this limit, you won’t be granted the loan.
Lenders may also reject applicants without credit scores because they cannot assess their borrowing patterns without a credit history.
- Several Loan Inquiries and Applications
When you request information about Personal Loans from several lenders, you could commonly wind up submitting multiple Personal Loan applications.
But bear in mind that the bank will verify your credit rating and request a copy of your credit report from the credit bureau each time you apply for a personal loan.
Lenders and banks can start to question your financial reliability as a result, considering you to be credit-hungry and in need of money.
- Numerous Pending Loans
One of the most significant causes of personal loan denial is this. If your present debts and other commitments take up the bulk of your income, your Personal Loan application can also be rejected.
Because banks are able to access your financial profile and credit status even if you have taken out loans from third-party banks, it is recommended that you only take out loans when they are really essential and that you make sure that you pay your installments on time.
Your likelihood of obtaining a personal loan is decreased if you have many open accounts with banks and NBFCs.
It is advisable to keep current debts to a minimum and to set aside at least 50% of your monthly pay to avoid having your application declined.
- Income Requirements Not Met
Financial institutions want to be confident they will receive their money back on time before they issue a Personal Loan. Lenders check an applicant’s income to guarantee timely loan repayment.
Having a substantial and consistent income demonstrates your capacity to pay back all of your EMIs on schedule.
Salary workers can get personal loans more easily than self-employed persons since they have fixed income levels and sources.
Most lenders have set minimum income criteria for salaried and self-employed borrowers, so if you requested a Personal Loan amount that is more than you are eligible for, your loan application is likely to be rejected.
- Documentation Eligibility Parameters Not Met
Your request for a personal loan won’t be granted until all of your documentation has been verified. Your lender will decline your loan application if any needed documentation is missing or includes conflicting information.
Your personal loan application’s supporting papers are just as crucial as those you provide on their own.
Your name, age, income, and address are all important pieces of information that must be included on your personal loan application in order for the lender to properly research you.
If lenders find mistakes in any of these or other details you submitted in your Personal Loan application, your loan request will be rejected.
- History of Unstable Employment
The approval of your personal loan will also be influenced by your job history. This might be the most significant factor for loan denial.
If you change jobs too frequently or are unable to show regular work over a defined length of time, your application for a Personal Loan will be rejected.
Applicants who work for unregistered enterprises or get cash wages are usually rejected by lenders. Lenders examine your job history to lessen the possibility of loan default.
Hence, loan requests from candidates with less than a year of work experience or who have only been with their present job for six months or less may be turned down.
Tips for Improving Personal Loan Eligibility –
- Showcase your supplementary income sources, such as variable salary, quarterly rewards, and revenue from other sources, to battle low income and strengthen your status.
- Pay off all of your present debts, including credit card payments, on time before applying for a personal loan. Most lenders set a minimum credit score threshold before approving a personal loan.
- Apply for the loan jointly with another family member, ideally one with a higher salary and CIBIL score.
- Avoid submitting numerous loan applications at once since doing so might result in your application being rejected.
- Choose a lender with clear eligibility conditions that fits your needs.
Applying for a personal loan is easy. To receive quick or same-day approval, you simply need to fill in your basic information online once and submit your request.
But, this simple application procedure does not guarantee approval. Fill out the information completely since your lender will check it before accepting your application.
In order to help you avoid making the mistakes that might lead to your application being refused, we hope that this blog will help you better understand the usual reasons for personal loan application denials.