immediate cash loans

4 Reasons Why Your Personal Loan Was Denied


Ever since the beginning of civilization and transaction, the basic concepts of money and borrowing have remained the same. In those days if it was cattle loan or grain loan, today it is personal loan, home loan, vehicle loan and gold loan among others. Loans have certainly made life easier and simpler because when faced with any unforeseen situation, one can approach a lender to help. But a lender-customer relationship (especially for unsecured loans like personal loans) is built on trust and credit worthiness. And if the customer’s credit worthiness questionable, he/she will be denied the loan.

Given below are 4 reasons a loan application could be rejected:

  1. Insufficient CIBIL Score & Credit History:
    Your current Credit Score and past credit behavior are two aspects that lenders gauge before approving a loan application. It shows the way you handled credit in the past, whether you have repaid your EMIs and loans on time or if there has been a cheque bounce charge against you and so on. In case of any default on repayments, banks would think twice (and thrice) before giving you loans.
  2. Poor Income:
    Lenders may not give personal loans based on a good credit score alone. Your income should be consistent enough to convince lenders that you would be able to repay the EMIs meticulously. For instance, if your take home monthly salary is Rs.15,000 and you need a personal loan of 2 lacs, the lender is most likely to reject the application as it would be impossible to repay the EMI after all your expenses and other financial obligations. In this case, you can wait until you get a hike or apply jointly with your spouse or parent. Choosing a lesser amount or bigger tenure could also work.
  3. Flawed Paperwork:
    One of the most common causes for loan denial is incorrect or inaccurate documentation. Expecting a lender to sift through your erroneous documents is unfair and digital documentation leaves no space for errors anyway. For instance, if your annual income is stated as 6 lacs in one document and 6.6 lacs in another, you are instantly disqualified for personal loans. So  double check all your documents before clicking on ‘Submit’.
  4. Being An Ill-informed Guarantor:
    If you signed a guarantor to another person’s loan and that person has delayed or missed one or more EMI, you will be held responsible. Being a guarantor to unsecured loans is not at all advised and if you have to be one, do make sure that the borrower pays the EMI on time. Never become a guarantor unless you have complete faith in that person.

Summing it up:
If you have ever tried for a personal loan and got rejected, understand that there could be one or more reasons behind the bank’s decision. Focus on improving or correcting that reason that caused your loan application to be rejected before applying again as constant applications and rejections can cause your CIBIL Score to fall.


Leave a Reply