Anyone can be in need of money for any purpose, urgent or otherwise. Once you apply for a personal loan, you build expectations and want your loan to be approved quickly. Rejections are sad affairs and having a personal loan application rejected can be disappointing. It can be painful when you are in the middle of an emergency and your loan application gets denied. However, there is no need to lose heart. It is important to understand why your application got rejected and what you can do to fix the situation.
What is a personal loan?
A personal loan is an unsecured loan that can be availed of by a borrower without the need to specify the end-use or offer collateral. Since the lenders are taking more risk by offering you an unsecured loan, they have to be stringent in approval to ensure that the borrowers do not default. After all, lending is their business, not a charity and they cannot take the undue risk of non-repayment of loans.
Who is eligible to apply for a personal loan?
If you are an Indian citizen or resident over the age of 21 years and less than 60 years and earning more than Rs 30000 per month, you are eligible to apply for personal loan. It is clear that if you do not fulfil the above criteria, you are not eligible to apply for a personal loan.
Assuming you fulfil the basic personal loan eligibility criteria, you can apply for a personal loan. However, the lender has the sole discretion to accept or reject your application based on the information you have provided.
In case your application has been rejected you will need to find out the reason before you move any further.
Identify the Reason for Rejection
In case your loan application has been rejected, you will receive a message from the lender citing the reasons for rejection. Some of the most common reasons include
- Low credit score
- Low income
- Lack of stable employment
- Employment with a delisted company
- Outside the age limit
- Having multiple loans
You should get more clarity from the lender if you are not able to understand the reason for the rejection.
Check your credit score
Since personal loans are unsecured loans, lenders prefer to go with borrowers whose credit score is high, preferably 750 or more. Your credit score is a numerical summary of your credit history. If you have a high score, the gates to credit open comfortably while a low score can close the gates. You should check the credit report for any possible errors. If you have taken an earlier loan and repaid it, you should check whether you have obtained the No Dues Certificate. In the absence of this certificate, the loan would still appear as outstanding against your name and damage your credit score.
There could be other clerical errors like misspelling your name or address which has led to a mismatch. You can get these fixed before you apply afresh for a personal loan.
If your credit score is low because of delays or defaults, you will have to fix them immediately. You will have to wait for a period of time before your credit score can improve and you become eligible for a personal loan again. You will have to keep your credit utilization under 30% else your credit score will be affected.
Check your Debt to Income Ratio
If your application has been rejected due to low income, you can reapply for a lower amount of loan that is proportionate to your income. Lenders check the debt to income ratio and are wary of lending to people who are already servicing other debts. If the total EMI exceeds 50% of your net income, there is a high chance of your loan application being rejected.
Ensure that you submit all the documentation
Personal loans are processed quickly if the documentation you have provided is in order. You need to upload the following documents –
- PAN Card
- Aadhaar Card
- Salary statements for the last three months
- Bank statements of the salary account for the last six months
Make sure these documents are right. If there is an error, get them rectified immediately and reapply for the loan.
Reapply with a co-borrower
If your loan has been rejected because of a low credit score, you can choose to apply afresh with a co-borrower who has a better credit score. This may help you to get the loan approved.
Look for other options
If you are in urgent need of funds, you can look for alternate options like a gold loan or a secured loan against a Fixed Deposit. Finally, if you are in dire straits, you can swipe your credit card as well.
Once you sort out the basic reason for rejection, work towards fixing the root cause and reapply for a personal loan after a few months.
Getting a personal loan from LoanTap
If your personal loan application got rejected because you have multiple debts, you may choose to go for a debt consolidation loan from LoanTap. You can obtain a personal loan to clear off all your existing debts. This will ease your interest burden. If you maintain strict discipline on your monthly budget, you will be able to manage the EMI more efficiently. Your credit score will improve over the next 6 months and you can apply for a fresh personal loan.
Once you fill in the online application form and upload the documents, the LoanTap team will evaluate your application. If everything is in order, your loan will be approved and credited to your account within 24-36 hours.
LoanTap offers loans from Rs 50,000- Rs 10,00,000 for periods ranging from six months to five years. Interest rates start from 18% per annum. You can choose from a range of repayment options. After six months of servicing the loan, you can prepay the loan without any penalty.So, don’t take it to heart if your personal loan gets rejected the first time. Keep your cool, identify the reasons for rejection and work on them. Once you get them resolved, you can apply for a fresh personal loan after a few months. Visit our website to know more about personal loans and we will be happy to help.