Applying for a personal loan might seem an easy-peasy task. After all, all you have to do is fill in the form, assemble some documents, show a few proofs, and it’s done. But, is it really that seamless?
Irrespective of how quickly the lender assures the disbursement, there are always possibilities of getting the application rejected. That’s true! So, what is it that can lead to a personal loan rejection? And, how can you try not to get rejected? Let’s find out in this post.
One of the most common reasons that can get your loan rejected is not providing the proper documents that can help prove that you are eligible for this loan. Thus, before submitting the application, make sure you have gone through the requirements put forth by the lender.
Create a checklist of documents and stick to it while collecting the papers. This way, you will not miss anything. These days, almost every lender has listed their documents’ requirements online; hence, it will be easier for you to find out.
Undeniably, every lender has their own customized eligibility criterion that borrowers have to match. The list includes Income, identity, age, job profile, etc. Besides, being a borrower, you should also be in the same city from where the lender is operating.
Generally, most of the personal loan rejected cases include people putting their applications ahead without paying attention to these requirements. This leads to quick and sometimes, unnotified rejection.
Basically, secured loans are the ones that you take while pledging an asset, be it a house, car, jewellery, or anything else, in the form of Collateral. In case you Fail to repay the loan, the lender seizes your collateral.
This way, the collateral may also work as a motivator to pay the instalments on time. However, if you ever had defaulted on a secured loan in the past, this may compel the lender to reject your current personal loan application as well.
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This is another significant reason that can lead to personal loan rejection. If you have been making multiple loan inquiries in a short period, the lender may take it as a negative aspect. Apart from assessing your history, the lender may dig deeper to find out vulnerable points against you.
This situation can get profound quite quickly. Every time you’d apply for a loan, whether get rejected or not, there will be a Hard Inquiry by the lender to check your Credit Score. This means that not just your score will drop down, but it will also be a red flag in processing your application.
If you are not knowledgeable about where you should be applying, you may find yourself in deep trouble. Sometimes, people simply check a lender once and continue with the application process. But what if, once your application is accepted, you need more money and your request is rejected?
Your most obvious step might be to apply somewhere else, right? If you do so, the banks or lenders will start questioning your viability. This could lead to a big rejection, leaving you lingering in the middle.
Lenders must disclose the valid reason for why they rejected the application. Generally, you may get this explanation within a week or so. Whether it is a common reason or a major one, the lender has to be completely transparent. Thus, if you didn’t hear from them yet, it’s recommended that you step up and ask yourself.
Making payments on time and keeping the balance of credit low are two such steps that you can start with to build your credit. However, this is not it. Another thing that you must do is check your Credit Report for any sort of errors, such as payments that would have reported wrongly as being delinquent or late, the account showing wrong balance, etc. If you want, you can also acquire a loan to build your credit.
Moving forward, the debt-to-income ratio basically helps lenders find out whether you have a lot of debt or not. If you have no idea regarding how to measure the same, divide the monthly debt payments by the monthly income to check this ratio in the percentage format.
If you get a high ratio (40% or more), you may have to experience a tough time getting an application approved. To bring this value down, assess your budget and try trimming the expense. Use that excess amount to pay your debts and avoid taking anything newer for a while.
Irrespective of what you do, there doesn’t seem to be a specific guarantee of having a personal loan application approved. But you can improve the chances of approval by averting the mistakes that have been mentioned above. Also, make sure that you go through the rejection policies of the Bank before applying. For instance, if you are applying in axis bank, find out every detail regarding axis bank personal loan rejection reasons. This will make things easier for you.
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