5 reasons why your personal loan application could get rejected
Personal Loans are the best bet to serve our needs for immediate cash. Since it does not require any collateral and you are free to use the money for any purpose of yours, this type of loan is in heavy demand.
Personal loans cater to a variety of reasons. For example, you may use the funds to plan a vacation, tackle a personal emergency, make a down payment for your vehicle or home, or even buy household items.
However, the flexible nature of personal loans comes with some restrictions. Since there is no collateral required, banks have a specific set of criteria that needs to be fulfilled by you before they give the go-ahead with the loan sanctioning. Therefore, you must take appropriate steps to ensure your personal loan application does not get rejected. The consequences of the rejection of any loan, in general, do not hold good on your credit history.
Here are some pointers that you should keep in mind to avoid personal loan rejection,
- Credit Score
A good credit score is imperative for loan approval. Usually, banks expect a credit score not less than 750. If you are planning to apply for a personal loan or any financial product online, make sure you have a good credit score.
- Incorrect Details on your Credit Report
Ensure that all the details mentioned in your credit report and loan application are accurate to your knowledge. The chances of rejection are high if there are any inconsistencies. If there are mistakes related to your name, address, or PAN number, make sure to get them corrected as soon as possible to avoid rejection.
- Incorrect Details on your Loan Application
Since personal loans do not require collateral, banks are anxious about safeguarding the repayment due to customer default. Hence, they rely heavily on the documents that you provide, like your salary slip and IT returns (some banks). If banks find any records have been fudged to obtain an advantage, your loan application will be rejected.
- Existing Loans
If you already have taken a few loans, another loan might burden your income. If the lender thinks that your income is insufficient for another loan, they can summarily reject your loan application. It is suggested to keep your EMI commitments to less than 50% of your take-home salary.
- Applying for too many loans in a short time
Applying for a loan from multiple sources at a time gives the impression that you are a spendthrift. When this comes to the knowledge of lenders, they may be worried that you will not be able to repay the loan on time, and they would be inclined to reject your loan application.