This article particularly deals with looking into the various issues surrounding the rejection of a personal loan application. Once the application has been logged in, there are several background processes that occur based on which the loan application is approved or rejected.
1) CIBIL Score
Your cibil or credit score should be a minimum of 750 in order to be considered for approval. This is the reason why every individual must purchase a credit information report prior to their application, because if your loan is rejected once, it might take a while before you will be able to apply for a loan again (i.e. after a minimum of 6 months)
2) Documents mismatch / document fabrication
When people are in desperate requirement of money, they tend to lose sight of what’s at stake when they fabricate documents such as pay-slips in order to be eligible for a higher loan amount. Apparently, banks are not that easy to fool around with. The moment a documents mismatch is noticed by the bank where you’ve applied, the information will be passed on to every other bank, there ends your chance of even applying for loans elsewhere, for the rest of your life.
3) Exceed repaying capacity Limit
This happens when the individual applies for a loan, however his ability to pay the emi is a big question. For every individual, only a certain portion of his income can be spent towards paying emis while the remaining is required for living expenses. If the customer is already paying for either a credit card or loan emi, then banks tend to view such cases warily.
4) Customer Profile Score for each loan portfolio presented, the bank rates the profile on various aspects such as the income, residential stability as well as previous financial records. Every bank puts forth a cut off score which needs to be fulfilled by the individual.
5) Even the smallest of details matter, for instance, if there is lack of cooperation during the verification process (office verification, residence status verification so on), or sometimes the details provided by the customers are not 100% correct.
6) Having no loans or credit cards also make lenders wary, in this case the cibil score is usually a -1 or 0. Where -1 indicates no credit history whatsoever and 0 indicates transactions yet to be updated in your report.
Now that you have had a look at the primary reasons behind personal loan application rejection, let’s take a look at the solutions or rather best practices tips to help improve your chances of approval:
1) Maintain a positive credit record whether it’s your loan or credit cards, ensure that you repay promptly, to have an acceptable credit score. Avoid late payments or credit card settlements as these are some of the most common reasons for your loan application to be rejected.
2) Proper documentation
It is true that minimum paperwork is involved when it comes to personal loans, but even the minimum needs to be absolutely perfect. Apparently, banks are not that easy to fool around with. The moment a document mismatch is noticed by the bank where you’ve applied, the information will be passed on to every other bank, there ends your chance of even applying for loans elsewhere, for the rest of your life.
3) Never exceed the repaying capacity
It is always a good idea to not be knee deep in the debt pool, never engage in too many loans and then end up not repaying them. Although banks ensure you stay within the FOIR limit, being proactive and wise in your spending habits will definitely give you an advantage.
4) Ensure you co-operate fully throughout the entire loan application process, because it is you who’s going to gain or lose at the end of it all.
5) It is always a good idea to maintain credit cards, so as to have a credit history to show while applying for loans in the future.
Applying for personal loans has never been easier, whereas getting an approval has always been a bit tedious. As long as you do what is required of you, your loan will be disbursed before you know it.