Lalit and Firoz were both avid photographers. They decided to take a photography course in Singapore, which would cost about Rs. 1 lakh. The travel and living expenses would come up to another Rs. 1 lakh. So, the two college mates, who were also colleagues at the same firm, decided to opt for personal loans. Yet, Lalit’s loan application was accepted, while Firoz’s was rejected. Why did this happen? Get ready to uncover the top reasons for personal loan rejection.
Top Reasons for Personal Loan Rejection
- Bad Credit: The main advantage that Lalit had over Firoz was his credit score. Unfortunately, Firoz had maxed out both his credit cards and had not paid the dues either. Lalit was smarter with his expenses. He paid all his dues diligently and on time. This gave him a healthy CIBIL score, while Firoz’s score took a beating.
- Inadequate Earnings: Many people face loan rejection because they do not meet the income requirements. All lenders will require you to earn a minimum amount to be eligible for the loan. This minimum income requirement may also sometimes differ from city to city.
- Incorrect Form Submission: This is another reason many personal loans are rejected. Did you fill the loan application form incorrectly? Or maybe you did not fill in a particular detail. Both cases can result in loan rejection, so be very careful while filling the form. With a rejection, you stand to lose the processing fee and risk losing your good credit score. In fact, Firoz may have entered an incorrect detail on his form, in his haste to fill it up. He regrets not checking the form before submitting it, but now it is too late to make amends.
- Past Loan Repayment Record: A personal loan is an unsecured loan. Lenders provide such a loan only after assessing the applicant’s loan repayment history. Have you ever defaulted on a loan? Then your chances of getting a personal loan approval may be slim. Make sure you close all your existing loans and pay your due EMIs before applying for a personal loan.
You can check your personal loan eligibility before applying for the loan. An eligibility calculator is available on every lender’s website. Checking your eligibility will give you a clear picture of what to expect. If you do not make the cut, you can at least save on the processing fee. This amount is deducted even if the lender rejects your loan application.
In a Nutshell
Personal loans are clear-cut and well-defined monetary tools. Loan processing today is much more transparent as well. Lenders mention the terms, conditions, and eligibility criteria clearly. Make sure to check these before you apply for a loan. If you are eligible, you could get your loan within three days.