If your personal loan application is rejected, there is a waiting period which has to be completed in order to re-apply for the loan with the same lender. The waiting period can range from 30 to 90 days depending on the lender.
A Guide on How to Avoid Personal Loan Rejection Image for representation.

The approval of your personal loan application depends on various factors such as your credit score, income level, collateral, etc. This is known as personal loan eligibility. To find out if you are eligible for personal loan, visit an online comparison website, and enter your age, income, occupation, and preferred loan amount on the personal loan eligibility calculator. The tool will give you a list of personal loan offers that you are eligible for. Compare the features and benefits of each offer and choose a lower interest rate personal loan with a flexible repayment option.

Unlike a car loan or home loan, a personal loan can be used for a wide range of purposes such as home renovation, wedding, child's education, debt consolidation and so on. If your personal loan application is rejected, there is a waiting period which has to be completed in order to re-apply for the loan with the same lender. The waiting period can range from 30 to 90 days depending on the lender.



WHY IS A PERSONAL LOAN REJECTION FROWNED UPON?

Each time you apply for a loan, a hard enquiry is made into your credit score and credit history with one of the credit bureaus in India. More number of hard enquiries will affect your credit score negatively. Therefore, don’t apply for multiple loans in a short period of time. The lender may see multiple hard enquiries as a desperation for funds and a pitiable financial situation. This will serve as a red flag and cause your lender to reject your personal loan application.


COMMON REASONS FOR PERSONAL LOAN REJECTION

A personal loan approval can't be guaranteed but you can improve the chances of approval by avoiding certain mistakes that may lead to rejection. Let's find out the reasons for the rejection of a personal loan application:

— A bad credit history and low credit score indicates the applicant's inability to repay the loan on time. This can cause the bank to reject the applicant’s personal loan application.

— Lack of a steady or insufficient income means the debt-to-income ratio will be higher. Personal loan EMI shouldn't exceed 50% of your salary. Or else, your loan application will be rejected.

— Providing incorrect details in your personal loan application form is a sure way of getting rejected. Be honest about the particulars you furnish in your application form along with valid supporting documents.

— Having too many loans like car loan, home loan, and credit card debt can give your lender a pause. It is a good cause for rejection as your debt-to-income ratio will be higher which means you have a high chance of defaulting on your loan.

— Personal loan can be a secured or unsecured loan. If you have a bad credit score, you can pledge a collateral and get a secured personal loan to make ends meet. In the case of a secured loan, if you provide an insufficient collateral or security, then the bank will reject your personal loan application.

TIPS TO AVOID PERSONAL REJECTION

Before applying for a personal loan, ensure your chances of loan approval are higher. There are ways in which you can improve your chances of loan approval. One way of doing it is by following these tips to avoid personal loan rejection:

— Check your personal loan eligibility: Ensure your income level meets the eligibility requirement for a personal loan as set by the lender.

— Check your credit score: Based on the data collected from banks and other financial institutions, Credit Information Bureau India Limited (CIBIL) calculates your credit score. This score is used to determine your loan approval. A credit score of 750 or above is preferred by banks for personal loan approval.

— Review your credit report: Sometimes, there are chances of human errors occurring in a credit report. You can review your credit report once a year, and in the case of errors, bring it to the notice of the credit bureau for rectification.

— Pay your credit card bills on time: Delayed, partial or skipped credit card bill payments can negatively affect your credit score.

— Make loan EMI payments on time: Same applies for loan EMIs. Set an auto-payment for loan EMIs with your bank so as to avoid defaulting on payments and risking a negative credit score.

— Don't close your loans prematurely: Closing a loan before its tenure can have a negative impact on your credit score. If you have come into a sudden inflow of cash, you can make partial repayment of the loan amount instead of closing the loan prematurely.

— Don't exceed your credit limit: Make a note not to exceed your credit limit, use only 30% of the limit to maintain a good credit score.

— Don't apply for multiple loans at once: More number of hard enquiries will definitely affect your credit score. Assess your financial needs and apply for a loan when it is absolutely necessary.

— Verify the particulars furnished in the application form: Before submitting your personal loan application form, check the details provided by you. Submit relevant supporting documents such as identity proof, address proof, and income proof along with the application form.

It is easy to apply for personal loans online and get instant approval. However, due to certain factors, personal loan applications can be rejected. Therefore, before applying for a loan, it is important to check your credit score and personal loan eligibility. When choosing the loan amount, make sure not to exceed your repaying capacity..