Have you been turned down for a personal loan? Knowing more about personal loans, how they function, and the steps involved in applying for one will help you prepare for a re-application with a higher probability of acceptance. Continue reading to learn why your loan was denied and what you can do to increase your chances of getting a loan.
Personal loans are unsecured loans, which means you don't have to put up any collateral to get one. These loans are available from a variety of financial organisations and banks online. If you are a salaried employee who makes at least $30,000 per month, you are qualified to apply for this loan. Your creditworthiness will determine whether you receive a loan, the amount of the loan, and the terms of the loan (tenure, EMI, and interest rate).
What documents you will need for loan application?
Each lender will ask for a different set of documents, thus there is no standard list. Varying lenders have different requirements for the documentation you must submit with your application. Most lenders will typically want the following documents:
Account Number (Permanent) (PAN)
Ration cards, Aadhar cards, passports, and utility bills can all be used as proof of address.
Pay stubs over the previous three months
Salary account bank statement for the previous six months
Mandatory E-NACH form
Based on your application, the lender may request further papers for verification.
5 Ways to Fix your Personal Loan Eligibility
While personal loans are the most accessible kind of debt, getting one approved can be difficult. Because there are so many companies in the market, lenders face fierce competition. Every lender has their own set of lending standards. When evaluating your personal loan application, the lender will consider a number of different variables. Let's take a look at how you might improve your loan eligibility.
1) Monitor the Reason for loan rejection
To find a solution, you must first understand the problem. Your loan application could be refused for a variety of reasons. The following are a few of them:
Monthly earnings This is one of the most important considerations when reviewing a loan application. Your borrowing capability increases as your income rises. The lender must be certain that you will be able to repay your personal loan. You may be able to negotiate the loan term and interest rate if your salary is higher. A lesser income increases your chances of being turned down for a loan; even if you are authorised, the lender is likely to offer you a smaller loan and/or charge you a high interest rate.
Credit Scores: Your credit history and score play a significant influence in whether or not your loan application is approved. A good credit score is the outcome of a strong credit history. The credit score is calculated using information from the credit report. It's a three-digit number between 300 and 900 that was calculated statistically. Your creditworthiness is determined by this score. The lender decides whether or not to forgive your personal loan based on your credit score. A credit score of 750 or higher ensures faster loan acceptance. Your credit score also plays a role in determining the interest rate on your loan. If you have a higher credit score, the lender may be willing to provide you a loan with a cheaper interest rate. A low or unsatisfactory score may result in disapproval.
Inaccurate or incorrect information: Before being approved, each application is extensively reviewed. Every detail on the application form is double-checked. Any inconsistency in the information raises suspicion and may lead to your personal loan application being rejected. The tiniest of details must be filled in carefully and precisely. You could be prevented from getting any additional loans if you mislead the lender.
Rotational jobs or unstable job: Personal loans are typically issued based on your monthly income, whether you have a rotating or unstable job. Working for the current organisation for more than six months is one of the requirements for acquiring this loan. As a result, frequent employment changes will hurt your loan application. Lenders seek for income stability, and if they don't see a consistent monthly income, they may be hesitant to lend you money.
Number of outstanding loans or debts: Having an excessive number of outstanding loans may reflect negatively on your credit history. One of the causes for loan refusal could be this. Paying off your present loan or obligations and then applying for a new loan is one strategy to prevent rejection due to this reason.
Too many loan inquiries: Every time you apply for a loan, the lender contacts CIBIL to inquire about your credit score. Each inquiry is recorded in your credit report and mentioned. There would be too many such enquiries if there were too many loan applications. This would imply to the lender that you are financially insecure and rely on a variety of credit sources. This is not taken well by lenders, who may reject your personal loan application.
2) Work on your credit score
Your creditworthiness is determined by this score. The lender will decide whether or not to clear your loan based on your score. If you have a score of 750 or higher, you have a good chance of being approved. Your credit score may also be used by the lender to determine what interest rate to give you. You may be offered a personal loan with a reduced interest rate if you are more creditworthy (i.e., if you have a strong credit score).
As a result, it is critical to establish a positive credit history. Make it a practise to verify your credit score on the CIBIL website to avoid any credit information report inaccuracies that may have impacted your score. Paying your bills on time will help you keep a good credit score. Choose loans with a longer repayment period. Your EMI will be significantly lower if your loan is for a longer period of time. A lower EMI indicates affordability, implying a lower risk of defaulting on payments.
3) Maintain the Right Debt-to-Income Ratio (DTI)
This ratio determines how much debt you have in relation to your income. A higher DTI indicates that you have a lot of debt and may not be able to pay it back. DTI of less than 40% is preferred by lenders. You must repay your old loan before taking out a new one in order to keep your DTI ratio low. This demonstrates a commitment to making timely payments, and lenders will be eager to issue new personal loans at attractive rates.
4) Research, Compare, and then Borrow
Every time you make a loan inquiry, it is noted in your credit report and has a negative impact on your credit score. As a result, before approaching a lender, do your homework and compare goods online. As previously said, each lender has their unique set of lending standards. The interest rate may also change. You must choose a lender that understands your demands and can supply you with a personal loan quickly and easily.
5) Prepare and organize your documents before applying
Make sure you have all of your paperwork in order. Check your application form once more. Before you apply, double-check your credit score. To comply with the lender's terms and conditions, do not provide any inaccurate information. Obtain a co-applicant with financial stability if necessary for your application. Do not submit a new application if you have previously been refused. Before reapplying, give yourself some time to recover.
Conclusion
There's no need to be discouraged if your personal loan application is turned down. To boost your chances of loan approval, simply work on improving your credit report and following the methods outlined above. Once you've completed this checklist, you're ready to submit your personal loan application.To find about the best pricing and deals, call our toll-free number +91-9477079053. They'll help you in every way they can. Please contact me at Personal Loan Online Apply if you have any more.
Comments