A personal loan is a multipurpose loan that enables people to realize their financial goals. It is an unsecured loan and hence you are not required to pledge any collateral while availing a personal loan. Nowadays, with increasing financial institutions and online loan providers, availing a personal loan has become far more convenient. Moreover, leading banks and NBFCs also provide you the option of customizing your loans according to your requirements. There are certain aspects like your credit score, source of income, etc. that financial institutions take into before approving your personal loan. It is important to take care of these factors for hassle free loan approval. Failing which, there are chances that your personal loan application might get rejected. Some of the most common reasons why personal loan applications get rejected are mentioned below:
Poor credit score
Your credit score plays a crucial role in your loan approval. A poor credit score hampers your repayment capacity, thereby affecting your chances of loan approval. Too many outstanding loans, late payments of EMI and unsettled debts lead to a poor credit score.On the contrary, a high credit score will not only increase the chances of your loan approval but also make you eligible for loans with competitive interest rates. Moreover, a good credit score can also help you avail a high loan amount. Therefore, make sure you have a good credit history before applying for a personal loan. By managing your finances wisely, you can successfully improve your credit score.
Too many applications
Applying for a personal loan with too many lenders reflects negatively on your credit score. Instead, you should compare various loan offers online and apply for the one that best suits your needs.
Unstable employment history
Financial institutions check your source of income before approving your personal loan. Unstable employment means an unstable flow of income. Therefore, if you have a history of quitting jobs frequently, then there are high chances of your personal loan being rejected.
Low annual income
All financial institutions have minimum income criteria. In order to be eligible for a personal loan, your annual income should satisfy the criteria set by your loan-provider. Failing which, your personal loan application is likely to get rejected.
You must always make sure that all your documents are duly checked and do not have any faults. Leading banks and NBFCs require minimal documentation. In addition to that, it is possible to avail the loan amount within a short span of time.
Now that you are well aware of the common reasons for the rejection of personal loan application, make sure that you avoid these mistakes to have hassle-free loan approval. Apart from personal loans, you can also resort to a personal line of credit to fulfil your requirement of instant funds.