You cannot apply for a personal loan without proper deliberation as it may lead to its rejection, which adds a bad rating to your loan application. But, you can easily apply for the personal loan again provided you are aware of the reasons to not get rejected again. Let’s get straight to the major reasons for personal loan application rejection.
#1. High Existing Debts
You may already have credit card or loan debt obligations to repay for in a time period, and when you apply for another personal loan the lenders can easily reject your application based on the debt burden that you’re already carrying. Therefore, you cannot just keep on lending from different sources for every financial obligation.
To avoid such a situation, you must remember to apply for credit cards or loans according to your repayment capability. It’s better if you repay your debt payments on time as scheduled, even if you want to apply for another personal loan, but keep the ratio of unsecured loans to secured loans as low as possible.
#2. Less Credit Score
Your credit portfolio becomes your resume for the personal loan approval process, as you don’t need to submit any collateral against the loan. Typically, lenders provide threshold credit score criteria to apply for a personal loan to them, without which your application gets rejected straight away.
This can be easily ignored if you have a credit score above 750, as below this you may miss good personal loaning opportunities. For this, you need to track your credit score by maintaining a credit portfolio with some financial institutions like TransUnion CIBIL.
Even if you have a lower credit score, financial institutions like NBFCs can lend you a personal loan at higher interest rates than the banks. Or, you can approach a lender with whom you have a credit history or account, which won’t require any credit score verification. Alternatively, you can apply for a secure personal loan against any fixed deposit.
#3. Different Loan Applications
You may enquire about the personal loan information from various lenders, and you may end up applying for the loan from multiple lenders. However, every time you have applied or enquired for the personal loan, the credit bureau gets the report and it affects your credit score in a negative way.
To avoid such speculations from banks and financial institutions, you should apply for online personal loan marketplaces, where you can explore and compare different options amongst top lenders without impacting your credit score. This way you can easily take up the best offer without coming under the review of credit authorities.
#4. Unstable Employment Record
Your employment history plays a crucial role in getting you the best personal loan offers, especially if you’re working in some reputed organizations. As if your company is not registered or unlisted, your application rejection chances get increased a lot. Also, if your employment history involves multiple job changes in a short period of time, this shows your instability to get a fixed source of income.
For this criteria, maintain a good employment record duration of at least three years, working for one year minimum at a single organization. Or if you have a self-employed business then you need to have at least three to five years of existence of the business for the loan approval.
#5. Lower Income Than Required
It is not to be doubted that your income statements or documents become the prime source of security for the personal loan lenders to approve your loan. You need to be able to demonstrate a sufficient and stable income amount which can repay the loan EMIs on time, after deducting other expenses of the individual. Such a system makes personal loaning a lucrative opportunity for salaried employees or self-employed ones as the latter doesn’t have a fixed source of income. There are different income brackets for both the salaried and self-employed personal loan applicants, which is the eligibility criteria for the same.
Therefore, you must avoid such a situation by calculating personal loan EMI payments which can help you gauge your monthly expenses. Alternatively, you can apply for a personal loan from NBFCs which do not have income support as the most important criteria.
#6. Missing or Incorrect Documents
Most of the time people miss certain important documents while applying for a personal loan, which leads to rejection of the application in the preliminary stage itself.
You must list out the documents required before applying for any personal loan, as this practice keeps you updated of any changes or requirements which can be managed before the loan approval submission.
The personal loan facility can help you face the financial lows, you need to be able to avail the loan in the first place. Your personal loan application rejections are noted negatively in your credit report, which can hamper your future lending scope. Keep in mind the above points and be prepared to be accepted before applying for the personal loan.