Reasons for Personal Loan Rejection and How to Avoid them
Applying for a personal loan is easy. You just need to fill in some basic details and submit them online to get instant approval. However, this fast application process in itself may not guarantee approval. Just imagine, what will happen if your personal loan application gets somehow rejected or you are unable to arrange funds to meet or prioritise your financial requirements.
Here, let’s have a look at some important factors that might minimise your chances of personal loan approval:
- Incorrect Documentation:
Not submitting the right details and documents can be a major behind the rejection of your personal loan. If the lender finds any inconsistency in your information, they will out rightly reject your loan application. So, make sure you check the documents before submitting your personal loan application.
- Not having a steady source of income:
Most of the lenders have a defined minimum income requirement. They check your ability to repay. So if you don’t have a steady income, lender might assume that you cannot repay the loan timely. Therefore, in absence of a steady job, make sure you have other sources of income like rental income which could help you get a loan.
- Poor Credit History:
Your credit score will help the lender make an assessment of your risk of default. A credit score ranges from 300–900 and the higher your credit score, better are your chances of getting the loan. Lenders usually look for a score above 750 to sanction the loan.
Repay your loans timely and keep balances low on credit cards to improve your credit score.
- Multiple Loan Enquiries:
Multiple loan applications can affect your credit score negatively. To avoid this situation, you must do your research properly and compare your options in advance. After considering and observing all valued options, apply for the only loan you actually want to avail.
- Fulfilling other eligibility criteria:
Apart from your income and identity, you need to ensure you fulfil other eligibility criteria set by the lender like being the right age. So, double check the terms and conditions before applying for the loan.
- Insufficient Bank Balance:
Lenders often check the balance in your bank account to verify your ability to repay. Therefore, it is suggested to maintain a rational bank balance to get your loan approved instantly.
Armed with the knowledge of what not to do and how to make up for the loopholes, you surely have a chance to avail the loan.