Unforeseen emergencies can occur at times. When you are in need of urgent funds, a Personal Loan is a great solution. Although applying for a personal loan is a hassle-free process, sometimes your application may be rejected. It is important to understand the reasons behind the rejection of your loan application so that you can rectify it. Here, we have explained in detail the reasons for your loan application rejection.
Common Reasons for Your Personal Loan Rejection
If your loan application has been rejected and you are wondering why your personal loan application is being rejected, don’t worry; we have listed some of the common reasons for loan application rejection.
Income and Debt
One of the most important factors that lenders consider when applying for a personal loan is your income and the debts that you have incurred. Your income and debt will give lenders an idea of your financial standing and whether you will be able to repay the loan on time. If your debt is more than your income or you are unable to repay your debt, then your loan application will be rejected.
Credit Score
Credit score is one of the major factors that lenders consider before approving a personal loan application. The way you handle your credit determines your credit score. If you have a good credit score, that means you are capable of handling your finances well. However, if your score is anything less than 500, it is considered a poor credit score, and your application will be rejected. The minimum credit score accepted for the application varies from lender to lender. For a loan application to be accepted, try to maintain a credit score above 700.
Error on Credit Report
If you’ve faced significant financial challenges like bankruptcy or foreclosure, your loan application may be declined. However, there’s no need to worry because you can rebuild your credit score within 18 – 24 months.
Job Instability
Lenders want to make sure that you have a reliable source of income that will enable you to repay loan payments on time. If you have an unstable job or income, that can be a big challenge when applying for loans. Those who frequently change occupations or those who are experiencing prolonged unemployment could find it difficult to get loans. However, your chances of having the loan accepted can rise dramatically if you have worked for your current company for more than a year and a half.
You Borrowed Loan Amount
Your lender will decide the amount they are willing to let you borrow after reviewing your financial records. This amount is usually determined by taking into consideration your present income level and debts, as well as how much you can easily afford to repay each month. If you apply for a personal loan that is more than you can really afford, the lender can completely reject it. It’s advisable to be reasonable and ask for a loan amount that makes sense for your financial condition rather than aiming for a large sum.
Conclusion
Figuring out why your personal loan application got rejected is crucial for better financial planning. By understanding and fixing the issues, you can improve your chances of getting approved. Whether it’s improving your credit score, providing clearer income information, or meeting lender requirements, knowing these things helps you navigate the application process better. Remember, every rejection is a chance to learn and do better next time. Use this knowledge to improve your approach, making it easier to achieve your financial goals in the future. LoanTap provides personal loans at affordable interest rates with minimal documentation.
