A personal loan is one of the most favorable and secure options when it comes to looking for financial assistance. It’s not like playing a hand of blackjack Game. The amazing benefits of personal loans grants an individual to use the funding from this loan for any financial requirement except for agricultural and business ventures.
However, as easy as it may sound, an application for this can also get rejected, leaving you without any funds. This may pose a problem, especially if you require a personal loan for any emergency financial need.
So how can you avoid rejection of such a loan? By understanding the different common reasons as to why this gets rejected, you can take the necessary steps and ensure that your application has a high chance of approval.
Given below are the different reasons for the rejection of an application and how you can avoid it:
Your current residential address is on the defaulter list:
As part of the application process for the personal loan, you will need to submit proof of address. However, if you have lived under the same roof as an individual who has defaulted on a loan payment or any other financial due and who has consequently been reported to the CIBIL, the bank would have maybe blacklisted your address. In this case, there is a high probability of your loan application getting rejected. To avoid such a situation, you will need to first check with the CIBIL to see if your address is on the defaulter’s list or not. If that occurs, take the necessary steps to make the change.
Failure to repay your dues on time:
No doubt, you would have a schedule to keep to if you need to pay your bills or any credit cards. Any failure to repay these dues on time will lead to the reporting of your profile to the CIBIL. When you apply for a loan such as a personal loan, the bank will definitely look up your financial track record. Such details would influence the bank’s decision to approve your loan, which could lead to a rejected application. To avoid such a situation, you must keep a strict vigil on all your repayments, well before you apply for this.
High debt to income ratio
Banks will always check if you have previously applied for a loan, or if you are currently paying off another one. In comparison to this, they will also check your income, not taking into account other income from other sources apart from your employment. If additional borrowings, such as the application for the personal loan would increase the strain on your income, making it unlikely for you to repay the loan back efficiently, your application has a high chance of rejection. To avoid such a situation, you must first repay your entire previous amount or any other dues. Ensure that your debt to income ratio is low enough before you begin the processing for this loan application.
Apart from these, there are ample other reasons which would lead to the rejection of your personal loan. However, with proper planning and strategy, you can easily ensure that your amount has a low chance of getting rejected.
4 Reasons why you’re Loan Application can be rejected?
A loan is a great way to fulfill any financial requirements or assist in financial expenditures. In addition to this, you can opt for loans that will suit your need to perfection, for example, a car loan to purchase a car, or a business loan to finance one’s business. However, as a part of the application process, you will need to satisfy certain loan criteria. These criteria may differ from the type of loan you may need to apply for. While you can always use the loan calculator to check your eligibility and avoid the possibility of rejections, here are some factors you can consider when applying for the loan.
Joint loan with your family or friends:
As a part of the application process, another individual may apply for a joint application. However, certain banks have restrictions when it comes to fulfilling the criteria for the joint application. For one, there is a restriction when it comes to sisters applying for a co-applicant. Alternatively, banks do not provide a co-applicant status to friends of the applicant. However, you can choose to opt for a loan with your parents as co-applicants.
Your loan application has been rejected before
It is not a wise move to keep applying for an impulsively and without proper rationalization. If your application gets rejected, it will be recorded in your CIBIL record. Therefore, you must weigh the pros and cons before applying anywhere. With every application you make, wait for feedback or an offer before applying for a different institute. This will give you a chance to rectify any error or even update your credit score before you apply for your application
You are a compulsive job-hopper:
Banks place a lot of importance on job stability when it comes to applying for an amount. Certain banks even insist that an applicant should be employed with their workplace for a certain tenure before they are eligible for any. However, this tenure can change depending on the institute and type you are applying for. Additionally, if your company’s future indicates that it is not financially stable, the bank you are applying for a loan has a right to reject your applicant.
You had to pay when you were a loan guarantor
When you stand as a guarantor for other loan applicants, you have to stand responsible in the event that the individual does not repay the borrowed funds. When this occurs, you will be responsible enough to repay back the funds. This, in turn, will affect your CIBIL score, and consequently your future applications.
There is no guarantee that your personal loan application will be approved. These above-given mistakes are the most common ones, and you require doing your best to avoid them. If you are planning on applying for a Personal Loan, then keep your credit history clean and provide the right information. Still, it is up to the vendor’s eligibility criteria whether you get the personal loan or not. All you can do is follow these easy must-dos.