With no collateral, a personal loan is a real saviour to meet any immediate financial requirement. While it seems a viable option, getting the approval of a personal loan is not easy. There are many reasons behind the rejection of a personal loan, from poor credit score to previous rejections of loans.

However, you may not know the specific grounds of sudden rejection. Banks and financial institutions evaluate your personal loan application using a lot of parameters. Indeed after a long wait, nobody likes to hear “you are not eligible” or “your loan application is rejected!”

You may easily escape the rejection pile when you employ caution on a few things. Let’s take a brief outlook on personal loan eligibility criteria before we move into how to prevent your loan from rejection.

Personal Loan Eligibility

Salaried individuals, self-employed individuals, and professionals are eligible for applying for a personal loan, provided they meet the minimum requirements in the following categories.

• Minimum age 21 years and maximum age 60 years; in case of self-employed professionals,
• Minimum age is 25 years.
• Employed for more than two years
• Employed for more than a year with the current employer
• Minimum monthly net income range from Rs.15000 to Rs.25000, which varies slightly based on lenders and residential city.

Reasons to Reject and How to Solve Them

• Insufficient Income

The monthly income you earn is the major influencing factor that serves as a doorway to consider your loan application file. Lenders evaluate your monthly income under two significant conditions. It should meet the minimum eligibility conditions, and you should have the ability to repay the loan instalments. When your income is insufficient to meet the minimum criteria, banks and other lenders reject your application.

Make sure to self-analyse your financial capability to make the repayment of the monthly dues.

• Bad Credit History

It’s a pooled term that comprises various levels of bad credit. Missing a single EMI payment may dramatically lower your CIBIL Score. Delay in paying your credit card due may make you defaulter. Even if you never missed any due, rejection of a previous loan application causes a dip in the CIBIL score.

CIBIL score dictates the creditworthiness of an individual. Apparently, when the credit score is low, it leads to bad credit history.

• You already have too many loans

Regardless of your financial status and repayment capacity, if you already hold too many active loans and credit cards, banks reject your application.

If there is no use of multiple credit cards, surrender the cards which you may not need. Try not to apply for personal loans then and now.

Poor track record of repayments also stands a reason for rejection. Make sure to avoid delay paying the dues.

• Incomplete, Insufficient and Incorrect Details

Data is the key element that values your credibility. Most of the worthy and eligible applications easily get rejected because of incomplete and incorrect details. You may miss giving a copy of your salary certificate or your identity card.  Banks decide to approve or reject your application based on the documents you provide. Verify before filling up sensitive data such as bank account number, IFSC code of bank branch even your contact number.

Submit all the relevant documents, furnishing complete details that support your application. Lending institutions verify every single document you provide. Inconsistency becomes a strong reason for rejection.

Remember, rejection of application impact your CIBIL score.

• Compulsive Job Hopping

Lenders place a lot of importance on your employment status. This is the reason where you should furnish the copies of bank statement and your previous employment records. If it appears you are a job hopper, be assured your application won’t be approved.

The basic eligibility criterion to apply for a personal loan is stable employment with a single employer at least for a year.

• No or Thin Credit File

Past credit history is one of the criterions used to judge the financial reputation. If you have never applied for any loan, banks out rightly erectly your application to avoid risk.

Keep all the accurate information and supporting documents handy. Some overcautious banks conduct an exhaustive background check to ensure the credibility of the applicant.

One reason for rejection may accumulate for other reason and badly impact your credit score and history. Do not apply for personal loan unless you are in dire need of finance. Keep all supporting documents readily available and furnish all essential information instantly. Late payment of bills or paying an EMI with interest may appear trivial. However, it impacts your credit history significantly. These are the major reasons for rejection of a personal loan application. Make sure to avoid these pitfalls.