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Three Reasons Personal Loan Applications Get Denied
If you've been denied a personal loan, don't panic. A cash shortfall can be stressful and having your loan application declined can pile onto it. But the reality is that it happens to a lot of people. That’s because lenders usually set minimum criteria for approving loan applications. Even if you fall slightly short of those criteria, your application may be turned down.
That doesn't mean you're not financially irresponsible. On the contrary, it implies that you must make a few monetary adjustments to match their criteria. But before that, you need to know the possible reasons for your personal loan being rejected. These can include:-
1. Low credit score
A credit score is a value between 300 and 900 that represents your creditworthiness and thus plays an important role in a lender's decision to approve a loan. Lenders usually have a minimum credit score for approving a personal loan. If your credit score falls below this level, you will be denied the loan. Applicants with no credit score may also be rejected since your lender will be unable to evaluate your financial behaviour without a credit history.
A credit score of 750 or above is usually regarded as good for the approval of loan applications. If your credit score is below 750, you can improve it with proper practice. You can also reach out to NBFCs for a personal loan because they have lower credit score criteria than banks.
2. Multiple loan applications
Unlike MSME loans, car loans, etc. - when you apply for a personal loan from different lenders, they request your credit report from the Credit Bureau to verify your credit score. The credit bureau considers these as hard enquiries and includes them in your credit report which has a severe impact on your credit score. This makes you look credit hungry and in urgent need of funds from lenders and banks, and it puts your financial reliability and repayment capacity in question.
Before you apply for a personal loan online, explore all the different offers that can help you get the best interest rate. However, keep in mind that each application for a loan may result in another hard inquiry. Apply for only what you need, and then try again after a few months.
3. Missing or Incorrect Document(s)
Once your documents have been verified, your application for a personal loan will be approved. If a document is missing or if the information in your documentation is incorrect, your lender will decline your loan application. Your personal loan application form, like the other documentation you submit with it, is essential. The information you provide for your personal loan application, including your name, age, income, and address; is essential for lenders to get the necessary details about you. If lenders detect mistakes in any of these or in your personal loan application, your loan application will most likely get denied.
Check the list of necessary documentation beforehand and be ready with it. If you apply for a personal loan online, carry scanned copies of all documentation and if you apply in person, bring the originals along with necessary copies. Also, make sure your original documents are in good condition. Fill out the information on your application form carefully and properly. Avoid overwriting but do provide the necessary information correctly and without spelling errors. Fill in your name and address as they appear on your KYC documents. Last but not least, double-check the details you provide before submitting your personal loan application.
Personal loans from Muthoot Finance come with minimal documentation, quick processing time and disbursal, and competitive interest rates. Visit your nearest Muthoot Finance branch to know more.
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