With the increased use of technology in the financial sector, not only has borrowing a personal loan become easier, approvals are quicker too. But, this alone doesn’t guarantee approval of your personal loan application. In order to get a green signal faster, you must abide by your lender’s terms and conditions.
Further, knowing the common reasons for a personal loan rejection will allow you to sidestep them and give your application a boost. So take a closer look at the things you should avoid to keep the risk of rejection at bay.
Back-To-Back Personal Loan Applications
For each personal loan application that you file, a lender checks your credit report with a credit bureau. Such bureaus consider multiple loan applications in a short span of time these as hard enquiries and record them in your credit report. When lenders view this information, they assume you to be credit-hungry. It also indicates that you may not be able to pay EMIs, which is reason enough for them to reject your loan. To avoid this, compare your options, use eligibility calculators and apply only for a loan that you’re certain you’ll qualify for.
Low Credit Score and Bad History
Another major reason for rejection of a personal loan application is that you have a low credit score and an insufficient credit history. Your credit score and history help the lender gauge your credit behaviour and assess the risk involved in approving your loan. A good score of 750 and above and a clean report indicate that you are creditworthy and can be trusted to repay the loan on time. Conversely, a credit score lower than 750 and nil or poor credit history indicate that the lender is looking at a high-risk applicant. As a result, you may face rejection or get an insufficient sanction at a higher interest rate. So, always maintain a good credit score and pay your dues on time to avail a personal loan when you need it.
Several Existing Loans and High Debt-to-Income Ratio
Lenders also reject your personal loan application if you have a high outstanding debt. This is because they think that you are already overburdened with debt repayment and won’t be able to manage another EMI. In this regard, maintaining a debt-to-income ratio of 35% is ideal as it will gives you a higher chance of securing approval. If your DTI is very high, lenders may reject your loan as it’s unlikely that you have enough income to service an additional loan. To avoid rejection, pay off a major chunk of your existing debt and then apply.
Unstable Employment and Low Income
As a personal loan is unsecured in nature, lenders prefer to issue loans to those who have stable employment and earn a regular salary. Hopping from one job to another is detrimental, as it means that you may not always earn a regular income. Further, having a low income can reduce approval chances as the lender may think that you are not capable of repaying a loan. So, it’s a good idea to work at an organisation for at least 2 years and disclose all your sources of income in order to qualify for a personal loan.
Failure to Meet Eligibility Criteria and Produce Documents
Each lender has its own eligibility criteria to assess your creditworthiness and repayment ability. Failure to meet these criteria can lead to rejection. Therefore apply for a loan only when you meet all, or most of the eligibility terms. Also produce correct and complete documentation to hasten approval. Better yet, apply with lenders like Bajaj Finserv who have simple eligibility terms and minimal documentation requirements for Personal Loans. These are as follows:
- You should be an Indian resident aged between 23 and 55 years
- You should be employed at an MNC, private or public company
Additionally, you only have to submit minimal documents that include:
- KYC documents like PAN and Aadhaar card
- Employee ID card
- Last 2 months’ salary slip
- Last 3 months’ bank statement of your salary account
Further, when you apply for a Personal Loan through Bajaj Finserv, you can access a sanction of up to Rs.25 lakh in just 24 hours, without submitting collateral. Get approval within 5 minutes and track your Bajaj Finserv Personal Loan application status in just a few clicks. What’s more, you can choose a flexible tenor spanning 12 to 60 months to make repayment easy.
Now that you know the reasons of personal loan rejection and how to avoid them, you are all set to apply for one and enjoy quick approval. To expedite the process further, be sure check your pre-approved personal loan offer before you apply.
