Personal loans are unsecured loans which can be availed by a borrower without an end-use clause. Unsecured lending is risky for banks and NBFCs as they do not have the security of an asset pledged with them. Due to this risk, banks have become very stringent in offering loans and have many internal criteria which one needs to satisfy before any personal loan is approved. 

Many times, personal loans are applied in situations of emergency like a medical condition of a near one or for paying for fee or education for a family member. It really hurts a lot when credit is denied when you need it the most. 

This article is for those who have faced rejections on their personal loans are looking at ways to reapply for a personal loan.

Let us go step by step. 

Step 1: Find Out The Reason For Personal Loan Rejection

Unless you know the reason for rejection, it will be difficult for you to know what steps you should take to improve your position before reapplying for the loan again. 

Lenders need to provide you with details for personal loan rejection in 30 days. You will get a loan rejection letter which will have details about why your loan was rejected. Some of the common reasons for loan rejections could be:

  • Low credit score

  • Unstable employment

  • Insufficient income

  • Working in a delisted private company

  • Not falling into the age limit

  • Living in an address which is present in the defaulter list 

If you are not able to understand the reason or if you need more clarity, contact the lender using the contact details available on the letter. Get clarity before you move to the next step. 

Step 2: Evaluate your credit score

Credit scores are important and form the cornerstone of any loan getting approved or rejected. Only after the credit score hurdle is passed, the lenders move on to evaluating your income and repaying capacity. 

Personal loans are unsecured loans, hence it is important that applicants have a good credit score

to qualify for the loan. If you are not sure of your credit score, you may check it here. In case you have a low credit score, evaluate reasons for the same. It could be due to errors on your credit report or due to your credit habits. 

Errors on your credit report could be disputed. Learn about the right way to dispute your credit report errors. If the issue is due to clerical errors like mismatch in spelling of names or similar, these small issues can be corrected and then, you can reapply for the personal loan. 

If your score is low, you need to resolve your negative accounts first. Once resolved, you can improve your credit score by using score building products which are loans or credit cards tailor-made to help improve score. You can also go for secured loans or credit cards which banks will be more inclined to approve as the risk involved will be less. At the same time, ensure that you don't miss out on payments and use your credit card within the prescribed credit utilization ratio of 30%. 

Step 3: Check If You Meet The Debt To Income Ratio

There are cases where the loan is rejected due to low income. In this case, you can apply for loans that are made available for people with lower income.  Or you could try reapplying with a lower amount if you feel the amount applied for in the initial application is on the higher end. 

You may also want to clear some of your existing loans if you feel your credit mix is more concentrated towards the unsecured loans. Lenders look for a judicious mix of secured and unsecured borrowings. 

Additional Reading: Personal Loans for individuals with Low income

Step 4: Get Your Documentation Right

Personal loans are one of the preferred loans as the documentation requirement is low and is processed faster. The documents generally required for processing of personal loans are:

  • Document Proof for Identity

  • Document proof for Address

  • Documents in support of income 

  • Bank statements

Check back with your lender if your documents are in order. If not, you could make arrangements to get them in order before resubmitting them for loan.

Step 5: Look For Alternate Options

Often traditional sources of lending like banks and financial institutions like NBFCs follow a very strict criteria for lending, which makes it difficult for self-employed individuals and individuals with low or no credit score to get approval on loans.

If you do not have time and in need of funds urgently, you can look for alternative lending options.

Lot of fintech lenders are in the business of lending and they cater to low income, self-employed and low credit score groups of people. As they use alternate data to supplement a person’s credit score, they lend to a wider base of individuals.

You could think of options like gold loan or loan against fixed deposit as well.


If you are still facing difficulties to obtain a personal loan, you may want to check out our range of personal loans which are specifically catered to individuals with various ranges of credit scores.

CreditMantri can also help you build your credit score through our credit improvement services so that you can be eligible for any kind of credit sooner.

A personal loan rejection does not mean the end of the road with respect to credit; it could sometimes be a blessing in disguise which could make you more credit knowledgeable and rectify all issues that could creep up during a bigger emergency.