Loan is the financial aid that is provided by the lenders to the eligible applicant. The lenders are the banks and the NBFCs that verify the identity and other relevant information of the applicant and then give approval for the loan. A personal loan is one that is avail by the borrowers for personal use. You can take a personal loan easily online with a few clicks. After submitting the personal loan application you get the approval and disbursal of loan within hours. A loan can be a planned decision if you have enough knowledge and have a plan to repay it on time. You should have relevant financial needs and the budget prepared in your mind before applying for the loan.
It is high time that we need to understand that loan is not a burden on our shoulders but it is a planned decision if you have enough knowledge. The article will help you in overcoming the mistakes that can lead to instant personal loan application rejection. Now let’s know what is personal loan?
What is a personal loan?
A personal loan is a type of unsecured loan offered by financial institutions, such as banks or online lenders, to individuals for various personal financial needs. Unlike secured loans, personal loans do not require collateral, making them accessible to borrowers easily. Borrowers receive a lump sum of money upfront, and they are expected to repay the loan over a fixed period with regular installments that include both principal and interest.
The terms of the loan, including the interest rate and repayment period, are determined based on the borrower’s creditworthiness. Personal loans can be used for a wide range of purposes, such as consolidating debts, funding home improvements, covering medical expenses, or financing major purchases. Now you can apply for an instant personal loan to get the personal loan approved hassle-free within hours.
Eligibility Criteria for Personal Loan
The eligibility criteria for a personal loan can vary depending on the lender and the specific loan product, but generally, the following points outline common requirements:
Age: The applicant must typically be between 18 and 65 years old, although this can vary based on the lender’s policies.
Income: The applicant should have a steady source of income, whether from employment, self-employment, or other verifiable sources. Lenders often have a minimum income threshold.
Credit Score: A good credit score is usually required for personal loan approval. Lenders use credit scores to assess the applicant’s creditworthiness and repayment history. Personal loan application gets rejected if the applicant has low credit scores.
Credit History: Lenders will evaluate the applicant’s credit history to check for any defaults, late payments, or other negative marks on previous loans or credit accounts.
Employment History: A stable employment record or business history can enhance the chances of loan approval. Some lenders may require a minimum period of employment or business operation.
Debt-to-Income Ratio: Lenders assess the applicant’s debt-to-income ratio to determine if they can manage additional debt based on their current financial obligations.
Citizenship/Residency: The applicant is typically required to be a citizen or a permanent resident of the country where they are applying for the loan.
Documents: The applicant needs to provide necessary documents, such as identification proof, address proof, income documents (salary slips, tax returns, etc.), and bank statements.
Repayment Capacity: Lenders evaluate the applicant’s ability to repay the loan, considering their income and existing financial commitments.
Employment Stability: A consistent employment history makes easier to get the personal loan approved.
Top 09 Mistakes that can Lead to your Personal Loan Application Rejection
Income and Debt:
You must maintain your debt-to-income ratio for taking a personal loan. Maximum 35% of your income should go in debt, more than that will make you credit hungry.
CIBIL Score:
For the easy approval of personal loan your credit score must be above 700. Hence, if you are thinking about taking personal loans then make sure you have a credit score above 700.
Error in the CIBIL Score:
There are times when the credit score has certain errors in it. The errors in the credit score can be fixed easily online.
Incomplete Loan application:
The incomplete loan application has the maximum chance of rejection. Hence, it is advised to complete the loan application before submitting it to the lenders.
Signature Mismatched:
There are times when the signature of the borrower mismatches from the signature that the borrower has done in the bank. This becomes the reason behind the rejection of Personal Loans.
Fund Utilization:
This is a lesser-known fact, but the people who usually apply for personal loans use the funds for marriage, vacation, home renovation, or buying a new gadget. However, if you are applying for a personal loan so you can use the funds to set up the business, it will contradict the income security. Always remember that banks give you a loan based on your current salary, not the growth of your business.
Residential Stability:
Usually, the documents you provide for KYC take care of your Residential Stability by giving banks the proof that you have a permanent address that confirms your stay in the city.
Forgot take NOC from the previous lenders:
Take the NOC from your previous lenders because the NOC affects your Credit Score.
Bank’s Defaulter List of Location:
If you are living in a location or an area that falls under the bank’s negative zone or comes under the defaulter list, there is a high chance that the bank will end up rejecting your loan.
Conclusion
Here are the top reasons behind the rejection of personal loans. However, there are certain NBFCs that provide you with a personal loan even if you have a low CIBIL Score, but the personal loan interest rate in such cases shall be higher than the usual one. Therefore, it is advisable for the borrower to keep in mind all the points mentioned above to approve the personal loan hassle free without much pressure. My Mudra is one such organization that is making financial aid a cakewalk for the people.
