An increasing number of consumers are now getting personal loans for their financial exigencies. Personal loans are very helpful for those who run out of options to arrange funds.
But, if your personal loan application gets rejected, it can be a major setback, especially when you are in dire need of funds. So here have Top Reasons For Personal Loan Rejection.
Before you apply for any loan, it is advisable to understand the underlying causes that may result in rejection of your application. This will also help you to be better prepared in near future.
Reasons for Personal Loan Rejection
Poor Credit Score:
Any bank or Non-Banking Financial Company (NBFC) checks your credit history before lending. Many factors, like default on any previous loans, skipping EMIs (not being regular with installments), late payment of credit card bills etc., impact your credit score. So, you need to improve your credit score in order to get your loan approved.
Lenders consider your net monthly income (income net of any existing loan installments being credited to your account) as one of the key factors to decide your repayment capacity. So, if the net income doesn’t meet the criteria stipulated by lenders, the loan application will be rejected. Moreover, the lenders attach great importance to your job stability. For instance, certain banks insist that the applicant should be employed with the current company for the past 3 years or more.
Juggling with other Loans:
If you have ongoing loans and your EMIs are not in line with your monthly income (paying your current EMIs takes a lot out of your income), then taking another loan will strain your income further. In this case, you are more likely to be considered as a high-risk borrower and your application may get rejected.
Incomplete or Incorrect Details:
Lenders verify your documents very carefully. So, if you have not provided required documents or made mistakes in your application, lenders can reject your application.
Previously Rejected Loan Application:
In case you had applied for loans earlier and those applications were rejected due to any reason, it reflects badly on your credit score. For this reason, your application may get rejected again, unless there is a significant improvement in your credit history and score since then.
Your loan application may get rejected for either one or a combination of few of the above discussed reasons. Before applying for a Personal Loan, make sure you have considered all these factors to avoid rejection.