Unsecured loans are personal loans that don’t require collateral or security. Lenders go through each Personal Loan application carefully. They will reject any application that does not meet their eligibility criteria. Banks won’t risk their money if they don’t find everything perfect.
If your application is rejected, it’s most likely because of one of these seven reasons:
1. Your credit score
Are you paying your EMIs on time and your credit card bills on the right terms? Your credit score could be affected if you are late on payments. A low credit score is not good for your financial picture. Banks will know if you have a bad credit history and are likely to default in the future. The banks have a strong reason for rejecting your loan application.
Even if you do not have any financial products, such as a loan or credit card, your Personal Loan application may be denied. This means that you don’t have a good credit record, which can make lenders hesitate to approve your loan.
2. High levels of debt
Lenders are very concerned about your debt-to-income ratio. The banks might not approve you for another loan if you have too many loans and repayments consume almost 40% to 50% your income. They will wonder if you can pay back the loans if there are too many. Your income will eventually become insufficient and you will default. It is better to repay a few loans before applying for another.
3. Unstable Employment
Your loan application will be rejected if you are constantly changing jobs. Lenders need to see proof that you have a steady job and a regular income that will pay the loan back. They cannot trust your stability if you are constantly changing jobs. Most banks require that you have been in the same job at least one year. Individuals who don’t meet this requirement will be rejected for loan applications.
4. Your Total Income
Lenders may refuse to give you a Personal loan if your income isn’t sufficient to cover the EMIs. Before applying, you should carefully review their eligibility criteria and assess yourself. Many banks require you to have a certain income level before you can apply. Your EMI cannot be less or equal to your income.
5. Incorrect details in application
Even though everything may be perfect, your application could still be denied. It could be because of incorrect information, missing documents or discrepancies in the proof submitted. You must ensure that you do not make any mistakes when filling out your application. Double-check all information and any proofs that you send to the bank.
Also, you should check your credit reports for errors. While you may not have done anything wrong, sometimes mistakes such as identity theft or incorrect entries can affect your credit score.
6. Too many rejections
Did you know that every loan application you submit is recorded by the credit bureau? Every time a loan application is rejected, it appears on your credit report and lowers your score. Credit reports can also be affected if you apply too often.
7. Right age and work experience
Banks have strict guidelines regarding age and years of experience. A Personal Loan application will only be accepted if you have at least two years of work experience. To be eligible for the loan, you must be at least 21. Maximum age to be eligible for the loan is 65 years old or retirement age.
It is not possible to guarantee approval of your loan application. These are the most common mistakes, so you should avoid them. Keep your credit clean and give correct information if you plan to apply for a Personal loan. It is still up to the vendor’s eligibility criteria if you are approved for the loan. These are the only things you can do.