Did you know that a poor credit history, constant job hopping, and innumerous applications made simultaneously are reason enough for lenders to reject your loan application?
Was your Personal Loan application rejected again but you aren’t sure why? There are a number of reasons why loan applications are usually rejected by lenders. But don’t worry, there are a handful of things you can do to improve the chances of your loan being approved.
Lenders are extremely cautious when they evaluate loan applications. And if the applicant doesn’t meet their eligibility criteria, lenders are likely to reject the Personal Loan application. Remember that Personal Loans are a type of unsecured loan for which you do not have to provide any security or collateral. Hence, lenders wouldn’t wan to risk their money.
So, if your bank turned down your application lately, it could be due to any of the reasons listed below.
Poor credit history
Have you been paying your existing Credit Card bills and loan EMIs on time? If you’ve defaulted on payments, then you are likely to have a low Credit Score and negative remarks on your credit report. And a poor track record of repayments is a strong reason for lenders to reject future loan or Credit Card applications.
Also, if you have a thin credit history, there are chances that lenders will turn down your application. A thin credit history means that you do not hold any financial products – i.e. Credit Cards, loans. Hence, lenders cannot assess your financial behaviour, and therefore, are hesitant to sanction your loan.
Additional Reading: 8 Reasons To Take A Personal Loan To Boost Your Credit Score
Constant job hopping
Unstable employment is another common reason for rejection. Lenders value job stability a lot as it is a sign that the borrower will be able to pay his/her dues without fail. So, if you have been changing your job every six months or the like, your loan application will find its way into the rejection pile.
Nowadays, most lenders have placed conditions such as ‘at least one year in current job’ or ‘two years of total work experience’ as their eligibility criteria. And individuals who do not meet the requirement stand a higher chance of loan rejection.
Income plays an important role in helping lenders decide whether you, as a borrower, will be able to uphold your financial obligation. So, if your income isn’t enough to accommodate the monthly EMIs attached to the loan, then your chances of getting a loan are low.
Most lenders usually have a minimum income requirement. If and only if you meet this income requirement, your application be considered. So, check your eligibility before you apply for a loan.
Too many loans
Knee-deep in loans already? Your lender may reject your current application. Wondering why? If you’re holding several loans, then lenders will need to check whether your income is sufficient to support the new loan’s repayments. Your debt to income ratio is very important to lenders.
Incorrect details in the application or in credit report
Double-check the information you enter in your application. Any discrepancies with the proofs that you’ve submitted and your application will lead to rejection. Even a lack of necessary documents can lead to rejection. So, make sure that you fill your application form correctly. And ensure that you submit all required documents to the bank’s representative without fail.
Psst! You can get an instant Personal Loan with no paperwork from BankBazaar. Check if you’re eligible for one.
Before you apply for a loan, you should also check your credit report for errors. Wrong payment entries or identity theft can bring down your credit rating, and thereby decrease your chances of getting a loan or Credit Card. It would be wise to keep an eye on your credit report to avoid such discrepancies. If you’d like to check your Experian Credit Score for free, click here.
Additional Reading: Here’s Why You Should Check Your Credit Report Throughout Your Life
Too many applications/rejections
Did you know that each loan application and rejection gets recorded on your credit report? Each time you apply for a loan, the lender will approach your credit bureau for your Credit Score and credit report. And your credit bureau will consider this as a ‘hard inquiry’. So, the more number of applications that you make, the more will be the number of hard inquiries, and this will bring down your Credit Score too.
Also, constantly applying for loans without any reason could make you appear desperate for money.
Additional Reading: 9 Paperless Approval Personal Loans Available On BankBazaar
There’s no complete guarantee that a lender will approve your Personal Loan application. However, you can increase your chances of getting an approval by avoiding the mistakes mentioned above. At the same time, keep these simple must-dos in mind while applying for a loan – avoid multiple loan applications, check your credit report, and maintain a clean credit history.
If you’re looking for a Personal Loan, you can check your eligibility for one on BankBazaar. All you have to do is enter a few details. Want to see what you’re eligible for? Just hit the button below.