Money serves as a necessity in today’s hour. There are situations in life where one might need more money than they actually have. During such a financial emergency people can borrow loans from the lender as per their requirements. A personal loan is one of the best options to fulfil your financial need for travel, marriage, higher studies, etc. Some people do not fit the eligibility criteria and complain that their personal loan application rejected.
To avoid such circumstances, we will talk about the common personal loan rejection reasons:
Applying with a low credit score
A credit score is a very important factor when applying for a personal loan. The very first thing a lender scrutinizes is the applicant’s credit score. If your CIBIL score is above 700, you are most likely to be eligible for a personal loan. Anything below 700 can be one of the personal loan rejection reasons. A higher credit score increases your chances of availing of a personal loan. You can stick to the minimum usage of your credit card to improve your credit score.
How to avoid it?
If you have a low credit score you can always approach NBFCs. They accept applications with low credit scores but on the contrary charge high rates of interest. If you don’t have a credit score you must try to approach a bank where you had past history like an old salaried account.
Not fit for the eligibility criteria
Besides income and credit score, there are certain eligibility criteria that you need to fulfil when applying for a loan. The lender checks the age of the applicant, nationality, and even education qualification. If you do not fit in any of these factors the lender might reject your application. To avoid loan rejection due to these reasons you should be aware of the dos and the dont’s before filing an application. You can always choose a lender with pan-India coverage to avoid such circumstances.
How to avoid it?
Most of the NBFCs(Non-Banking Financial companies) do not consider your income as a very important factor in your application. You can always calculate your personal loan eligibility beforehand to avoid any rejections.
Submitting incomplete documents
The most common mistake an individual does is submitting incomplete or incorrect documents. One should read the loan guidelines carefully before filling out the application. One should plan and stick to the checklist of documents and make sure to not miss out on any. If you choose a digital lender or NBFCs then you can fill out an application online and get a loan in your account within 24 hours.
How to avoid it?
Make sure that you submit all the necessary information about yourself like your age, salary, and correct address details. Avoid overwriting and double-check your documents. Get yourself a hard as well as a scanned copy of your documents.
Not having a steady source of income
Lender checkers the repayment capacity of the applicant. If one doesn’t have a steady source of income the lender will consider them an unhealthy client. This will get your loan rejected. Hence, if you are applying for a loan make sure you have a stable source of monthly income like a job or self-employment.
How to avoid it?
In order to not get your personal loan application rejected maintain a good employment record. You should have a minimum of two years of work experience and one year of work experience with the current company. Self-employed individuals should have a steady for at least up to three to five years.
Higher existing debts
You will be considered overburdened in debts if you have too many prevailing debts, open credit cards, and loans. This will land you in trouble and your lender will reject your personal loan application. In order to escape such mishaps, several borrowers minimize their existing debt repayments in the hope of getting a higher amount. This will bring catastrophe upon you since banks can access your financial profile and all your credit reports before approving your loan.
How to avoid it?
One must ensure to borrow credit cards and loans as per their repayment capacity and requirement. If you have availed a number of loans you must make sure to balance the repayment amount between secured and unsecured loans. There should be a clean repayment record and the number of unsecured loans must be lower in comparison to secured loans.
So, to get your personal loan application approved, one must avoid the above-mentioned mistakes. If your personal loan application faces a rejection, this information goes into your credit record. And this lessens your chance to get a fair deal on personal loans from any lender. You must calculate your eligibility beforehand and then apply for a loan to avoid rejections. If you do not stand in the criteria then you must improve and then apply.