Reasons Why Personal loans Get Rejected
Worried about your loan application getting rejected? A lender can reject your personal loan application on several grounds. Check out these reasons Why Personal loans Get Rejected by lenders. Availing a personal loan in India can be a demanding experience for some, while it can be a pleasant experience for others.
The word loan itself can seem to be a deterrent for some people, possibly because they may not be able to take the responsibility for a loan default, in case they are not able to pay back their EMI’s on time. It could be because one may not always do adequate research before availing a loan.
A loan, on one hand, tempts borrowers to “buy now, pay later” but at the same time, it has the potential to hurt the financial health as well as the credit score of the borrower because of its high interest rates. Therefore, a loan can be a double edged sword.
Anyone can be in requirement of a loan at any time. A good platform connects borrowers and lenders in the most suitable manner and at terms and conditions which are convenient to both parties. Such platforms are the home for quick personal loans.
One needs to do his / her due diligence and in-depth research from various loan providers in the market before availing a loan.
Having said that, there can be a few reasons why one’s personal loan application might get rejected by lenders / Banks:
Here are some of the top reasons Why Personal loans Get Rejected
Bad / Poor credit history
Poor credit history arises from delayed payments like EMIs and credit card bills. Any defaults on payments are reflected on the credit report as a low credit score. A poor track record of repayments can be a strong reason for rejection of personal loan applications.
A good credit history also has the advantage of providing a lesser rate of interest to the borrower.
Therefore, a cheap personal loan will come one’s way if one has a good credit history.
Frequent job hopping
Just employment is not enough. The person should be a stable employee of an organization. This shows credibility. A lender will usually place a lot of emphasis on job stability as that is an assurance that the borrower will be able to pay the loan amount as per the terms within the given tenure.
Therefore, people who have been changing their job every 6 months may have a difficult time availing a loan. It is not uncommon to find conditions like ‘at least one year in the current job’ or ‘two years of total work experience’ as the eligibility criteria.
Income is a very important factor when it comes to disbursement of loans. A lender will lay major emphasis on this factor to decide if the person will be able to uphold their financial obligation. One should meet the minimum income requirement if they want their loan application to be considered.
Needless to say, if one’s monthly income isn’t enough to accommodate the EMIs, the one’s chance of getting approval for a personal loan are low.
Too many ongoing loans
If one already has too many ongoing loans then the lender may outright reject one’s application. One’s debt to income ratio is very important.
The question may arise whether one will be able to support new loan repayments or not.
Too many applications / rejections
One may not be aware but each application and / or rejection gets recorded in the individual’s credit report. On each individual application of a loan, the lender will approach the credit bureau to obtain one’s credit score and credit report.
Often, the credit bureau will consider this as a hard enquiry. Each hard enquiry will most likely bring down one’s credit score.
Incorrect details in the loan application
All information entered in one’s application should be double checked for any errors, including the credit report. There should not be any discrepancy with the proofs one has submitted.
Moreover, all the necessary documents should be made available.
A lender will be extremely cautious while evaluating personal loan applications, given that no collateral is required.
Having said the above, one can easily get online quick personal loans with peer to peer lending platforms, with no collateral requirement (i.e. an unsecured loan). If one can avoid the above mistakes then his/her chances of getting an approval are much higher.
Whether you are technologically savvy or not, low interest online personal loans are just a click away when you use an online platform. You are living in a world where loans are at your fingertips and you have the power to finance your dreams now – life doesn’t get better than this
Summing it up, one should avoid multiple loan applications, keep a check on one’s credit report and maintain a clean credit history to get the loan one needs. The whole idea is that a loan should remain a financial asset (not a liability), as far as possible.