Reasons for Personal Loan Application getting Rejected - Personal Loan Blog - Tata Capital

Confused About Why Your Personal Loan Application Got Rejected?

Feb 28, 2017

When you apply for a personal loan, its generally after you have tried out other means to raise the money you need. After all, personal loans are not cheap.

But unfortunately, if your personal loan application gets rejected, it can be a big blow to your money needs at that juncture.

You might be definitely feeling dejected at the rejection. But you should nevertheless understand why your application might have got rejected. This will help you be better prepared for future loan applications.

So here are some of the most common reasons for personal loan application getting rejected:

1 - Insufficient income

Lenders want to make sure that the borrower earns enough money every month to repay their loans (in addition to regular expenses). So if the income doesn't meet the minimum criteria set by the lender, the application will be outright rejected. Even if the income is more than the minimum requirement, lenders look for possible weaknesses in income profile of the borrower. So if the income is not stable enough (low job stability) or if you switch jobs frequently, the lender might reject your application.

2 - High EMI-to-Income Ratio

If your current EMIs form more than 40% of your monthly income, it means that you have too much credit to be repaid. Chances are high that you will find it tough to repay your loans on time and hence you are perceived to be a high-risk borrower. A large part of your income is already going in servicing the current loans. So your new loan application might be rejected for this reason.

3 - Poor Credit score

If your past loan repayments have not been regular or if you have defaulted on any loans, it will reflect n your credit score (and report). The lenders give a lot of weightage of credit score and if the score is not great, your application will be rejected.

4 - Incomplete documentation or incorrect details

Sometimes, lenders reject the application because applicants have either not provided all the required documents or made mistakes in their application. Lenders have enough systems to verify all details and any inconsistency found are reason enough for rejection.

As you can see, there can be several reasons for loan rejection. It's possible that either one or a combination of few of the above discussed reasons might have led to the rejection of your loan application.