Did you apply for a loan, and it got rejected? You should not lose heart because it is usual for the loan application to get turned down. It could have happened because your credit score was poor or perhaps you did not send your bank statement with the application.
There could be several reasons for the loan application to be rejected.
Personal loan: Key reasons for refusal
I. Poor credit score: One of the most common reasons for the loan to get rejected is a poor credit score. This could be an outcome of default in payment and delay in payment of credit card bill. Generally, lenders decline loan application when the credit score is lower than a decent credit score i.e., 650.
II. Wrong lender: Sometimes, a loan applicant applies for a loan with a lender who has a very high criterion for loan approval. You could apply for loan with a bank or NBFC or fintech app.
Generally, banks have a high criterion for loan-approval, and they give loan at a low rate of interest. Conversely, NBFCs give loan at a higher rate of interest but their threshold for loan approval is lower.
III. Incomplete application: The loan could get rejected if you fail to provide necessary information such as Aadhaar authentication, PAN, salary slips or bank statement.
IV. New credit report: Sometimes the loan application does not have a credit history because s/he never applied for a credit card or a loan. This could also be a reason for the loan refusal.
You could take these steps to raise the chances of loan approval.
Follow these steps to improve your chances
I. Cross check your application with the ideal application and make sure you submit all the documents as explained in this Livemint article.
II. Build your credit report gradually by initially opting for a secured credit card.
III. Try to approach more than one lender across categories (bank, NBFC and fintech loan provider) to improve your chances.
Disclaimer: Mint has a tie-up with fintechs for providing credit, you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit score. Mint does not promote or encourage taking credit as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.
