Personal loans are unsecured loans that might be declined for a variety of reasons. Multiple personal loan rejections may raise the amount of hard queries on your credit report, lowering your credit score. Hard inquiries indicate a desire for further credit, and lenders may regard you as a high-risk borrower. If you applied for a Personal Loan and were denied, you should investigate why. It is advisable to learn about the causes behind personal loan rejections. Personal loans come with low processing fees and excellent interest rates for short-term necessities such as weddings, medical treatment, education, vacation, and home repairs, among others. Because the monthly income requirement is so low, people with a diverse variety of jobs and a strong online CIBIL score can qualify for a personal loan from any major bank in the country.
List of Reasons
There are six reasons for a personal loan denial, but they differ from lender to lender because each has its own internal creditworthiness and risk assessment process. The following are the most prevalent causes for a personal loan rejection in India:
Frequent employment changes give the lender the impression that you are untrustworthy of your employer. With such a mindset, securing a personal loan, which is an unsecured loan with no collateral necessary, may be difficult. Banks generally prefer that its borrowers have been working for at least two years and, more importantly, that they have worked in the same employment for the preceding year.
A consistent source of income demonstrates your ability to repay your personal loan. To qualify for a personal loan, each bank establishes a minimum monthly or yearly income criterion. Generally, banks have set a minimum net monthly income of INR 17,500. However, the income restriction varies from city to city. Applicants in Mumbai and Delhi may receive INR 25,000, while those in Chennai, Hyderabad, Bangalore, Pune, and Kolkata could earn INR 20,000. There is a chance that your personal loan application might be refused if you do not satisfy this minimal income criterion.
Working for a Blacklisted Company
Doctors, Chartered Accountants, employees of private limited firms, and employees of public sector organisations, including central, state, and district organisations, are the only ones who can get the best personal loan interest rates. If you do not fall into this category, your personal loan application will very certainly be denied. Even if you work for a private company, your personal loan application may be denied. This might happen if your company slips onto the bank’s list of prohibited businesses.
You must be between the ages of 23 and 58 to be eligible for a personal loan. Your personal loan application will be denied if you are not in this age category. The bank establishes an age limit to ensure that you will be able to repay the loan without problem.
Too many Programmes running Concurrently
Another issue that may result in a personal loan refusal is submitting too many loan applications, which gives the lender the appearance that you are desperate for credit and may be a hazardous candidate.
Insufficient CIBIL Score
Having a poor credit rating A high score demonstrates your budgetary responsibility. Lenders consider it a significant factor in determining a borrower’s creditworthiness. A personal loan will be rejected if you have a low credit history. As a result, it is recommended that you follow the steps on how to improve your CIBIL score before applying for a personal loan. This might be one of the main reasons your personal loan application gets rejected. These are the most common reasons why a loan application is declined. To avoid rejection, you must undertake comprehensive research on the loan before applying.