Wondering if your personal loan application is good enough? Or how can you increase your chances of getting an approval? Find out now!
Applying for a Personal loan is the ideal option for many in times of urgent need, thanks to its no collateral requirement and instant loan disbursal. However, there are several seemingly trivial reasons why a bank can reject your application. So, before you submit your application, make sure to avoid these common mistakes:
1. Applying with Poor Credit Score
Your credit score is the basis on which banks decide whether or not they can lend you money. So, maintaining a good credit score is very important. If you skip or delay the EMIs or credit card payments, it will adversely affect your credit score and consequently have a negative impact on your financial health, as all these activities related to credit are reported directly to CIBIL. And, a poor track record is a strong reason for loan rejection.
2. Applying without Determining Your Eligibility
Most lenders are very specific about the eligibility criteria for each loan product, which mainly includes the EMI to Income ratio which should ideally not above 70% Max, minimum age and income. If you do not meet the minimum requirement or fail to provide sufficient proof of the same, then your application will be discarded in the first stage itself.
3. Providing Incorrect Details in Your Application
Lenders check and verify every piece of information you provide before approving the loan application. If you provide false information (knowingly/by mistake) in your application form or the lenders find any discrepancies with the submitted proofs, your loan application will be outright rejected.
4. Frequent Job Hopping
Frequent job hopping is another common reason your personal loan application could be denied. While you may have switched jobs after every 6 months for better opportunities and higher salary, the lenders consider it an indication of unstable career and hence inability to pay your dues on time. Moreover, most lenders now require a continuous employment of at least one year to be eligible for loan.
5. Not Considering your Previous Loans
Your debt to fixed income ratio is crucial for lenders. If you already have an active loan, then your loan application may be rejected in the guise of your inability to sustain new loan repayments along with the on-going ones. Besides this, your loan application may also get rejected if you have a history of missing EMIs far too often or had defaulted on a previous loan.
6. Raising Too Many Loan Queries
You need to keep your patience after applying for a loan because each time you approach a lender, a CIBIL query is raised. Too many queries within a short period can reduce your credit score as it implies that you are credit hungry. And, the lower your credit score, lower are your chances for personal loan approval.
7. Ignoring Your Co-Applicant’s History
Your co-applicant’s CIBIL history is as important as your own. In case you have a co-applicant and he/she has a bad credit report or had been a defaulter previously, then it will hurt your application too.
There is no way to provide complete assurance that your personal loan application will get approved. However, if you avoid these common mistakes, your chances of getting a positive response will definitely be much higher. Lastly, do cross check your credit report for any errors- before applying- to increase your chances of approval.
