For any immediate needs of cash personal loans are a good choice. A personal loan application does not require collateral to be kept as security and also comes with its flexibility to use the loan proceeds as and how the person wants.
But along with the range of benefits for the borrowers, the loan comes with its share of high-interest expense and credit appraisal policies. Being one of the unsecured loan options, banks exercise stricter policies for the approval, disbursal, and recollection of the loan amount.
As getting a personal loan requires a person to have a strong credit score and a strong application, it is often rejected by the money lenders on common grounds. The watchful eyes of the banks are subjected to meet certain needs else the loans are rejected instantly.
Here are some common reasons for a personal loan application rejection by banks.
Bad credit score
A personal loan is granted based on the credibility of a person. As there is no security or collateral involved, the banks rely on the credit score of a person to evaluate if the loan is safe to be given to the person. And in this regards the CIBIL
score needs to be higher than 700 for a person. Leading banks take into account the ability of a person to meet their credit card bills, their EMIs, and regular expenses to find out the income and its disbursement ideas of the user. If a person is not able to maintain a CIBIL score of 700, their personal loan application is rejected.
Not meeting the loan Eligibility
A personal loan is provided to the users based on their eligibility to earn and repay the loan. Therefore the income statements and the job profile of the person matters. Banks demand the disclosure of bank account statement, income slips, etc to determine the loan eligibility.
If the income requirements are not met as per the loan applied, the loan is often rejected. It is extremely crucial for the banks to match the loan amount with the income of the person to determine the repayment schedule for EMIs. If these aren’t met the loan doesn’t work well.
Occupation and job profile
A highly educated professional with a job in a renowned company holds more chances to get a personal loan than a self-employed applicant with irregular income. The banks scan through the educational qualifications, job profile, employer details and salary of the person to dig into the creditworthiness of the person.
The more reputed the firm, the higher the position, the easier it gets for the person to get a personal loan. For repayment capacity, the banks demand P&L statement, ITRs, 3 years business statements, etc to find out business continuity. If you aren’t able to meet the career profile that satisfies the bank of their safety of loan disbursement, the loan application is rejected.
Inappropriate application forms
Application forms are designed in a specific style to incorporate all the details that the banks need for evaluation of loan eligibility. With personal details, contact information, income details, documents, signature, etc the application forms become a crucial determinant of an applicant’s credibility, income, identity, and reliability.
If the application form is not filled with all the required details the banks reject the personal loan application altogether. For an application to hold value the forms have to be taken seriously and provided with all the details. It makes the bank’s task easier and sorted.
Personal loans are granted to people under a certain age group. The working-age group i.e. 21 years to 60 years of age is the qualifying age for securing a personal loan. This is because it is the age group where a person is able to support themselves with regular income and financial stability.
It is highly likely to find your loan rejected if you are younger or older than the age group. However, if you have a steady income source money lenders might consider your credibility to make an exception.
If a person already has a lot of pre-existing loans in their credit profile, the banks shy away from granting another loan. They consider new loans only when they find that you are paying off the loan amounts on time and maintaining a loan balance that is safe and secure. For people who use only a small portion of their available credit and maintain good loan balances, the banks consider processing the applications and granting loans.
The number of secured and unsecured loans to your name is a big determinant of whether you should be provided with a loan. While the secured loans are granted on the basis of assets you have the security you can provide for the loans, the personal loan application is only approved when you have lesser unsecured loans to your name. if you have already taken an unsecured loan, there are chances that your loan application might be rejected.
Multiple loan inquiries
With every loan application made the banks seek the approval of the credit rating agencies by taking a dig into your financial history. Here all the loan applications, the financial status, the income statements, etc are represented to understand your financial stability. Too many applications can construe your image to be that of a credit hungry person wanting to borrow money for financing your life needs.
This image does not go well with the credit rating agencies or the banks to find you suitable for a loan. If you have been applying for too many loans without proper information or research, your credibility goes down and the personal loan application is rejected.
Making a personal loan application requires a thorough understanding of credibility. It requires a person to maintain their safe financial position with the need to make an application that is difficult to reject. Adapt smart measures to avoid the common reasons that banks consider rejecting a loan. It makes your application stand strong for easy approval and faster disbursal of loan.
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