7 Reasons Why Your Personal Loan Was Declined (And How To Fix It)
A personal loan is easy to apply for but does not guarantee approval before the scrutiny of the lender. After the application process by the customer, the lender has a detailed check on the application before he approves the loan. The lender goes through all the facts and details given in the application to verify the authenticity of the application.
A good credit score will help you get a loan quickly but it may not be the only factor that is evaluated and thus the information which is provided to the lender has to be correct and updated for any individual. Applying for a loan too often may also be a factor that leads to loan rejection by the lender. A personal loan rejection is always a bad thought even in your dreams and for situations where the individual is tightly strapped for funds, it is a nightmare. Personal loans are the easiest to apply among all the loans as they are unsecured loans and do not require any collateral or security.
Some of the reasons why personal loans can be rejected are given below:
1:Low Credit Score
A low credit score is one of the prominent factors why a personal loan might be rejected. A low credit score may be due to several reasons like untimely repayment of existing debts and not paying mandatory dues etc.
How To Fix low credit score?
A low or a bad credit score can be improved by creating a good credit history. A credit score of more than 700 is required for availing any loan for an individual. Paying credit card dues on time and repayment of existing loans on time helps to enhance the credit score of an individual.
2:Low Income
A person while applying for a loan has to check the eligibility. The criteria may involve a minimum income to be earned by the individual to avail of the loan. The eligibility criteria may differ from person to person and also depends upon whether the individual is salaried or self-employed. The individual also has to complete a certain amount of years with the employer to be eligible for the loan.
How To Fix It?
Before applying for the loan, the individual should check the eligibility criteria and then apply so that rejection is not faced by any individual. A loan rejection might also affect the credit score of the individual. After the minimum criteria are met by the individual, the loan application should be made.
3:Inaccurate Information
Any inaccurate information found in the application of the individual will lead to a decline in the approval of the loan. The information should be complete and authentic for any individual.
How to Fix the Inaccurate Information?
A thorough check should be made by the loan applicant before applying for the loan. The documentation that is needed should be proper and as per the requirements of the lender. Each lender will need different information for approval of the loan.
4:Existing Loans
If any existing loans are more in number, the lender will not approve the loan application and thus the loan will be rejected. The individual applicant should not apply for any loan if the existing loans are too many.
How To Fix the Existing Loans?
The existing loans can be clubbed and paid off using a single loan. The interest rates are lower and thus the applicant can benefit from availing of the loan. But the lender should approve the multiple loans that are pending. So, the applicant should check the eligibility for the same and then apply for the loan.
5:Unstable Income
If the applicant has an unstable income or unstable employment history, the lender will not approve the loan and this can be one reason for rejection of the loan. Since the personal loan is unsecured, the lenders do not take risks if the income is volatile for any applicant.
How To Fix It?
Before applying for the loan, the applicant should provide the lender with the income certificates and also the proof from the bank that the income earned is stable and will continue based on the history of the individual. The employer can also help the employees avail of a loan if the lender is rejecting based on salary.
6:Multiple Applications
If an individual is in urgent requirement of a personal loan, the applicant might make multiple applications to various lenders for availing of a loan. These applications are recorded and they may hurt the credit score of the individual.
How To Fix the multiple applications?
If the requirement is urgent, any individual should not apply to multiple vendors instead the individual can study the requirements for a single lender and try to fulfill the same. This helps the individual to seem creditworthy and not credit hungry.
Also Read: What are the possible reasons for loan rejection even with a good CIBIL™ score
7:Age Limit and Default Rate in Places
A person applying for the loan has to be a certain age and must be a major while applying for the loan. The loan can also be rejected if the age criteria are not met either the minimum or the maximum age for any individual. The maximum age is generally 60 because, after this age, the risk-taking capacity is low for any individual. Also, the default rates in some places are more which leads to rejection for any individuals.
How To Fix It?
The person should check the age limit before applying for the loan. Also, if the individual is applying from a place where the defaults are high, the person should provide extra proof of the stability of income and other required information.
FAQS Top Reasons for Rejection of Personal Loan
1:Can you apply for multiple loans?
Yes, an individual can apply for multiple loans.
2:Can a bad credit score affect the loan approval?
Yes, a bad credit score can be a reason for the rejection of a loan.
3: Can an unstable income affect the loan disbursal?
Yes, an unstable income can be a reason for loan rejection.
4:What is the minimum age limit for the application for a loan?
The minimum age limit is generally 18 years for applying for a loan.