Most of you already know that getting a personal loan has become the most convenient way to help you during emergencies. However, not everyone gets personal loan approval. There isn't a single reason behind personal loan rejection, yet everyone needs to know what the most common reasons are.
Whenever you apply for a personal loan, it follows a process that results in either rejection or easy loan disbursal. If everything goes as planned, you get loan disbursal within a few days (even a few hours). However, some borrowers face rejection due to multiple reasons.
Let's find out the most common reasons for PL rejections.
Every bank has eligibility criteria to offer a personal loan. You can visit the official website or mobile app to check their eligibility and ensure you meet the minimum criteria to apply for a personal loan. Basic eligibility criteria for a personal loan include the following:
A personal loan is most favoured by youngsters who have recently started their professional journey. This results in more personal loan requests by freshers in every industry. Often freshers in their field draw less salary, disqualifying them from a personal loan.
Anyone with a salary lower than Rs. 15,000 will be completely unable to meet their monthly needs alongside repaying the loan on time. Hence, banks/lenders always disburse personal loans with a higher monthly income.
Rs. 15,000 is the minimum income required to apply for a personal loan. If you are drawing less than 15K, your loan request will be immediately rejected.
NOTE: The minimum income can be higher than Rs. 15K in some banks. So, you must ask for the minimum income criteria before applying for a personal loan.
Every lender asks for at least 6 months' bank statements to know your financial habit. Your financial habits are also available in the credit score. Yet, getting detailed information about recent bank statements gives a clear glimpse of how you manage your money and use it for various purposes.
The prime component lenders/banks look into your bank statements is your repayment potential and affordability. If you fail to maintain enough funds in your account by the month end, banks/lenders will decline your personal loan request.
After receiving your PL request, the lender/bank asks you for simple documents to verify your identity. Banks verify the documents before further proceedings.
Below is the list of essential documents required for a PL:
Your PL request is immediately rejected if any of the given documents don't look genuine as per the standards. You may also face legal action if a false proof is submitted for a PL. Hence, before submitting the requested documents, always check them.
A credit score is a three-digit number that defines your financial potential and habit. A credit score above 750 is considered good, whereas below 680 is a point of concern for banks/lenders.
Whatsoever the reason is for a low credit score, banks won't approve your PL request. Some banks may still offer you a personal loan, including a higher interest rate and a shorter time.
A stable job is a good sign of your professional journey, and that's what every lender appreciates the most. A stable and secure job means you have a regular income stream. Frequent job switch means you cannot adjust with the company or don't serve the responsibilities you are hired for.
Your half-yearly bank statement is a good document to check your job security, and if you are found to have an insecure job, the bank will immediately reject your PL request. Without a secure job, banks can't stay assured of timely repayment.
Making multiple loan requests sounds simple (obviously). But every time you make a PL request, the respective bank/lender asks the CIBIL authorities for your credit report. With frequent and multiple credit requests, you are moved to a 'credit hungry' category that causes a big problem for the borrower.
If you are a 'credit-hungry' person, it shows your urgent need for finances from different banks. Such a case results in PL rejection with immediate effect.
The above are the common reasons that result in the rejection of your personal loan request. If you are planning to get one, the below-given steps will definitely help you.
Build Your Credit Score: With time, you should focus on creating a good credit score. If you have any, prefer repaying your existing loans and paying the dues on time. for tips on how increase your CIBIL score and prepare you for a new personal loan request, click this link.
Collect Your Documents in Advance: You already know the essential documents required for the personal loan application. Hence, it's better to collect them before applying. It will save time in document submission and make the process quick.
Believe it or not, personal loans are more like a boon to people in emergencies. Relying on your family and friends is no more possible as everyone is financially educated and has future goals.
Getting a personal loan gives you complete control over what you get from the bank and how you pay it. However, getting a personal loan means adding debt to your bucket. Hence, you should always make wise decisions when selecting a personal loan for emergencies. Thorough research and detailed comparison between different lenders is a smart way to shortlist one lender/bank and proceed with the disbursal process.
Consider the reasons mentioned above and ensure you don’t make them when applying for a personal loan.
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