Getting a personal loan is not always easy. There are a set of requirements that you have to fulfil to get a personal loan. If you do not meet these requirements—which are different for every lender—your application may get delayed, or worse, rejected. For instance, if you’ve got a decent credit score, that is, one that is above 650 on the national credit scale, then getting a personal loan is easy for you. However, if your credit score is lower than average or you have any other red flags in your credit history, you don’t have an ideal record for a personal loan. Similarly, there are other requirements, like a stable income and a good financial profile, to get personal loan. These requirements can make it difficult for some people to get personal loan.
Fortunately, there are some things that you can do to increase the chances of your application for a personal loan being approved by the lender. Here are six reasons why personal loan applications get rejected and what you can do about them:
- You Have a Low Credit Score
When you are trying to get personal loan, the first thing a lender checks is your credit score. If you have a good score, it makes it easier for you to get the loan. However, the fact that it has a lower score requirement does not mean that it is guaranteed to be approved. It is because lenders also look at other factors when deciding whether to approve or reject your application.
If your credit score is low, this can result in your loan application being rejected. The best thing you can do to increase the chances of your application’s approval in such a situation is to improve your credit score. Your credit score impacts many things, like your ability to get a mortgage, rent an apartment, or even get a job in the finance sector. So, the higher your score, the better. There are a few things that you can do to improve your score.
One of them is to pay off any debt you have and to make EMI payments on time. Doing so will increase your credit score. However, it may take a while before the improved record reflects on your credit report. The key is to be patient and punctual.
- You Lack A Stable Source Of Income
A stable source of income is one of the most critical requirements you must meet when trying to get personal loan. If you don’t have one, then you may find that your application is rejected even if your credit score is good. It is because lenders may reject your application if they don’t trust that you will be able to pay them back. The best thing you can do to increase the chances of your application being approved is to prove to the lender that you have a stable source of income. One easy way to do this is to get a job as soon as possible.
Once you have a stable income, you’ll be able to get personal loan as you will have the means to repay it. Another great way to increase your chances of having a successful application is to ensure you have all the required documents. Many lenders will reject applications if they don’t have all the documents they need to see. If you know you are missing out on one of them, you can get it to the lender as soon as possible.
- Your Debt-To-Income Ratio Is Too High
You will fail to get personal loan if your debt-to-income ratio is too high. It is a ratio you need to look at to see how much you owe versus your monthly income. Depending on this ratio, the loan companies will either approve or reject your loan application. If your ratio is too high, they will automatically reject your loan application without checking your credit score.
The best thing you can do to lower your debt-to-income ratio is to pay off any debts you have. This will show the lender that you have a steady income and will not default on the loan. You can also look for coupon codes that will allow you to lower your monthly expenses. This way, you’ll have less to pay each month, and your debt-to-income ratio will also be lower. You can then reverse your failure to get personal loan.
- Can’t Get Personal Loan Due To Limitations
Even if you have a good credit score, your application may still be rejected if you fall into a certain group of people with loan limitations. For instance, many lenders will only approve loans of less than Rs. 50,000 to people who earn less than a particular amount. In such cases, you will have to speak with multiple lenders and see who fits your requirements the best. Remember, most lenders will only consider the income that you have from a stable source of earning, like a regular job.
- Inadequate Financial Profile
Another reason why your application may be rejected is if you have an inadequate financial profile. For instance, you may not have a substantial credit history.
To avoid falling into either of these categories, talk to a financial advisor and work on building a good financial profile. To do so, you may have to take out small loans and build a good credit history, among other things.
A representative of your bank can also give you advice on improving your financial profile so that you don’t fall into one of these categories. Such advice may include investment opportunities for the long term.
Getting a personal loan can help you with important expenses. However, not getting approved for a loan can be frustrating. If you’ve failed to get personal loan in the past, you know how difficult it is to overcome. But there are ways you can still get a personal loan. You can find in-depth explanations and help with these measures on the Piramal Finance website. Looking at those suggestions will make your loan application process easier.