Updated March 30, 2021 | 05:59 IST
Apply for a loan facility only if you cannot do without it as any unsecured personal loan will incur high interest charges
Personal loan request rejected? Know the possible reasons for rejection
New Delhi: A personal loan often comes to the urgent rescue of those strapped for cash, and its flexible nature allows borrowers to use the ease of financing for any requirement.
Personal loans are readily available at competitive rates which can offer you a good deal. However, having a good credit rating improves the chances of approval of the loan application, but there are also other reasons that lead to the rejection of the application. Below are some dos and don’ts to avoid loan application rejection –
- Personal loans come with a minimum income and a minimum and maximum age requirement that must be met to qualify for the facility. You will be well advised to read the offer documents carefully and apply for a loan only when you meet all the conditions.
- Each borrower must submit a set of documents to apply for a personal loan, and the documentation requirement is different for salaried and self-employed applicants. Here is a list of the usual documents that must be submitted when applying for a personal loan (note that it may vary slightly from bank to bank)
- Your credit score plays a crucial role in determining not only whether your loan application will be approved or not, but also under what terms the loan will be granted to you. So, a bad credit score can result in a loan with unfavorable repayment terms like higher interest rate until outright rejection.
- While it makes sense to compare different options to find the best product, applying for multiple personal loans in quick succession can be very counterproductive. Banks will perceive this as a sign of desperation on the part of the borrower, which could lead to rejection of the application and a lowering of the credit rating.
- If you have an insufficient bank balance, lenders will reject your loan application. When reviewing your loan application, lenders look at your minimum net monthly income, the stability of your income, and sanction your loan accordingly.
So, work on improving your credit score, carefully assess all options, but be sure to only apply for the facility that best meets your requirements.
Also, don’t go for a personal loan just because you qualify or received a promotional call. Apply for a loan facility only if you cannot do without it, as any unsecured personal loan will incur high interest charges from 11 percent up to 24 percent.
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