Personal loans are the most accessible borrowing option and one of the greatest economic solutions for meeting our immediate cash needs. They do not need the submission of any security to the bank and can be used for any personal purpose. Instant Personal loan, on the other hand, have various advantages but come with a higher interest rate and a more stringent credit evaluation process. Because a personal loan is unsecured, banks use more stringent credit evaluation criteria when approving a loan application. As a result, a borrower must be aware of all personal loan elements and keep a close eye on them in order to reduce the chances of a personal loan application being denied.
Review the following common reasons why your loan application may be canceled to avoid such scenarios.
Why was my personal loan application not approved?
This is very definitely due to factors such as a low credit score, defects in credit history, and so on, as well as the name of the institution that provided the lender with this information. The following are the reasons in brief:
Credit Score Reduction
A credit score is a number between 300 and 900 that shows your creditworthiness and is used by lenders to determine whether or not to offer a loan. Before accepting a personal loan, lenders normally require a minimum credit score. CIBIL is one of the most well-known companies in India that provides lenders with credit score information. You are considered qualified for a Personal Loan if your CIBIL score is over 700, and you are very likely to be granted.
Applicants without a credit score may also be turned down since your lender will be unable to assess your financial habits without one.
Before granting a personal loan, lenders want to know that they will be returned on time, therefore they examine the applicant’s income to ensure that the loan will be repaid on time. If you have a significant and stable income, you will be able to pay off all of your EMIs on schedule. It is easier for paid employees to obtain a personal loan than it is for self-employed persons because they have defined revenue amounts and sources.
Incomplete Documents/Inaccurate Details In Application
Your application may be rejected if you submit documents with incorrect information or if you submit documents that are incomplete. If the applicant’s name, address, phone number, and other account data are incorrect, it will be unable to supply the necessary information. Banks won’t approve your personal loan unless you have all of the relevant information and documentation checked.
Bad Investment Profile/ Unstable Job
Financial stability is critical when it comes to approving a loan. The loan application is likely to be denied if the applicant changes jobs frequently, does unreliable freelancing work, or has a poor investment profile.
An Extremely High Number Of Currently Pending Loans And Debts
Another reason for a personal loan denial is if your present debts are considerable. Your potential lender may consider you to be overloaded with credit if you have too many open credit accounts, such as credit cards and loans, and you may default. In the eyes of the lender, your enormous debts put you in jeopardy, and your personal loan application may be denied as a result.
Several factors influence whether or not an application is approved for a personal loan. Age, nationality, and even educational credentials are utilized to assess personal loan eligibility in addition to income and credit score. Banks may be cautious to approve your loan application due to these issues.
A personal loan keeps you prepared for financial setbacks, but you must be able to obtain one. If your personal loan application is turned down once, it will appear on your credit report, making borrowing money more difficult in the future. To get the best personal loan interest rate, you need to be critical of the above factors. It’s important to keep the aforementioned factors in mind and only apply when you’re certain your loan application won’t be declined.