A personal loan acts as a great resort in times of financial difficulty. The financial instrument is offered by leading lenders and is especially popular as the funds do not have limitations on the end-use criterion. Whether it is medical expenses, wedding expenditure or just about any payment, a personal loan can be used to fulfil every kind of requirement.
It is true that personal loans are offered widely through an easy mobile application process. Lenders have made it easier for borrowers to secure the loan at the click of a button. However, it is not uncommon for personal loan applications to get rejected. The loan is of an unsecured type and this makes lenders more cautious when sanctioning the same. Fortunately, you can avoid a personal loan rejection by understanding the factors that lead to rejection. Read on to know few of the prevalent reasons:
Low Credit Score: A major factor that affects your personal loan application is the credit score. Every lender maintains a threshold credit score that must be met below which they do not lend. For a personal loan, lenders typically do not lend unless the credit score is 650. There is a very high chance of your personal loan getting rejected if you score is below this threshold. A borrower with a low credit score is viewed as a risky profile who could default in the future.
Low Income: Lenders also maintain an income threshold and do not lend below the same. Most lenders require you to have a minimum income of ₹20,000 to 40,000 per month. However, this limit is subjective and will change on the basis of the value of your loan. If your loan is of higher value, then the income requirement will be higher.
Employment stability: Lenders closely consider your employment stability when approving your personal loan. The stability of your job reflects your income stability and your ability to make repayments on time. If you switch your job too often, it can directly affect your personal loan application and lead to a rejection.
Discrepancies in Documentation: Non-banking and banking institutes closely evaluate and verify the details on your documents. If the lender finds that you have provided wrong information pertaining to your name, age or nationality, the application will be immediately rejected. It will have a negative effect on your credit score. Additionally, your profile is likely to be flagged and it will affect your future loan prospects.
Other Checks – The lender will carry out other checks on factors such as age, nationality, income records and more. Typically, personal loans are only offered to individuals above the age of 18 years. You must also be of Indian nationality with clear income records that reflect details of your profile clearly. The eligibility check varies from one lender to another. So ensure that you meet the eligibility criteria as listed by your preferred lender before applying for a personal loan or it could ultimately lead to your profile getting rejected during the first check.
Keep yourself aware of the above-mentioned factors to avoid rejection when applying for a personal loan. You can also use the Finserv MARKETS personal loan eligibility calculator to understand your prospects before applying for the loan. Remember, a rejected personal loan will not only disrupt your financial plans but also negatively affect your credit score.
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