6 Reasons Why Banks will Reject your Personal Loan

by MyMoney Mantra FinTech (Financial Technology)

Personal loans are one of the convenient options to fulfill your instant cash requirements. One of the attractive features of personal loans is that they do not demand any collateral security and the loan proceeds can be put to use for your personal requirements. However, this convenience comes at the cost of a comparatively higher rate of interest as well as a rigorous credit appraisal procedure. As personal loans are an unsecured form of financing, banks employ more stringent credit appraisal criteria in accepting your personal loan application. As a borrower of personal loan, you are required to know the common reasons for the decline of your personal loan application and keep an eye on those factors that minimize the chances of your personal loan application rejection.

 

(1)  Bad credit score

The banks and financial institutions assess your credit score to examine your repayment capacity. Since a personal loan is an unsecured form of financing, the lenders make their decision of lending based on your credit score. The lending institutions will approve your personal loan, only if have 700 CIBIL score points and above. Therefore, you must clear all your credit card bill payments and EMIs on time to maintain a good credit score and minimize the rejection chances of your personal loan.

 

(2)  Insufficient Eligibility

The banks and financial institutions examine your monthly income to assess your repayment capacity towards personal loan availability. You would be asked to submit your income documents to justify your income eligibility. Your application will be subject to get declined in those instances if you fail to meet the income requirements of your lender. Calculate your personal loan amount eligibility and apply for only the loan amount for which you are eligible. This can increase your chances of obtaining a personal loan. To check your personal loan eligibility, assess whether you comply with all of the following points:

• The personal loan borrowers can be salaried individuals, self-employed professionals, retired persons, student and house wife.
• The age limit of the borrower should fall between 21 years to 65 years at the time of loan maturity.
• The CIBIL score of the borrower should be 750 or above.
• The employment continuity with a particular organization or business continuity should be at least 2 to 5 years. Even 1 to 3 years of work experience can be counted for salaried employees to apply for the personal loan.
• The minimum net monthly income of the salaried individual should be Rs. 5,000 and above.

 

(3)  Occupation

The interest rate offered to you is based on your company profile and designation. If you work for a multinational company or a reputed company, chances are higher for your personal loan approval.  Self-employed individuals, on the other hand, are required to submit income documents such as ITRs, profit and loss account and other documents to justify their creditworthiness. Banks consider your business continuity and occupation as the major parameter to assess your financial viability and unstable work history can lead to a negative impact on your personal loan approval.

 

(4) Application form mistakes

It is quite common to commit errors while filing your personal loan application form. Small errors can accrue such as giving wrong details; missing relevant information etc can lead to the decline of your personal loan application. In the same way, it is crucial to detect your credit score and report any errors made during the filling up of application form for getting corrected immediately. Otherwise, it will lead to the decline of your personal loan application.

 

(5) Multiple inquiries

The credit report section shows all loan queries by the prospective applicant. So many multiple credit inquiries within a short period can further lead to the probability of personal loan application rejection as it highlights your inability to obtain the loan from other banks.

 

(6) Age of the applicant

Personal loans are often extended to individuals from a particular age group, which mostly comprises from 21 to 60 years of age. Even if you are very young or very old, the chance of your personal loan application rejection gets higher. Moreover, they are often extended to customers who have a consistent source of income.

 

Personal Loan Interest Rates

Banks or NBFCs sanction personal loans at affordable interest rates to both salaried class and self-employed professionals. One can apply according to their eligibility criteria and upon documents submission. Some of the best personal loans offered by the lender are as below:

·        SBI Personal Loan : SBI Personal loans are offered at a 10.50% rate of interest to its customers.

• ICICI Bank Personal Loan: These loans are provided at the interest rate that ranges between 11.25% - 18%.

·        IDFC First Personal Loan : 11.50% rate of interest is offered on IDFC First Personal Loan.

• HDFC Personal Loan: Interest rates provided on HDFC Bank Personal loan ranges between 10.75% - 14.99%
• Kotak Mahindra Bank Personal Loan: 10.85% rate of interest is provided on Kotak Mahindra Bank Personal loan.

 

Conclusion

Make sure to avoid the common mistakes as discussed above in order to make your personal loan application approved. However, banks take into account another criterion such as job continuity, age, education background, residence stability, etc before lending personal loans finally. To ameliorate your chances of approving your personal loan, you must pay your dues on time, maintain a good CIBIL score and submit your personal loan application with sufficient care.

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Created on Apr 23rd 2020 10:52. Viewed 500 times.

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