Understanding Personal Loan Rejections and How to Improve Your Chances of Personal Loan Approval

Posted on Tuesday, February 27th, 2024 | By IndusInd Bank

Are you feeling the pinch of financial stress, longing for a personal loan to alleviate the pressure, yet haunted by the fear of rejection? It’s a scenario many can empathise with. But fear not; understanding why lenders may reject your application is the first step toward securing that much-needed financial assistance. So, let’s delve into the five common reasons why personal loan applications hit a roadblock with banks. But before we embark on that journey, let’s take a moment to grasp the essence of personal loans.

Understanding Personal Loan

A personal loan is money you can borrow without needing collateral, based on your income and ability to repay. It can be used for various purposes like vacations, consolidating debt, or handling unexpected costs

Benefits of Personal Loans

Personal loans offer convenient access to funds with flexible repayment terms. The simple application process and minimal documentation requirements make obtaining a personal loan straightforward. Additionally, lenders prioritise quick approval and disbursement, ensuring timely financial assistance.

Exploring the Causes Behind Bank Rejections of Personal Loan Applications

Before delving into the reasons for personal loan rejections, it’s crucial to grasp the factors lenders weigh when assessing applications. While banks may offer instant personal loans, understanding why applications get rejected is paramount. Here are common reasons your personal loan request might be declined.

Insufficient Income: If your income is not deemed sufficient to comfortably repay the loan amount requested, banks may reject your application. They assess your income to ensure you can meet the monthly repayment obligations.

Poor Credit History: Banks assess your credit history to determine your creditworthiness. A poor credit history, characterized by missed payments, defaults, or bankruptcies, may lead to rejection as it indicates a higher risk for the lender.

High Debt-to-Income Ratio: Your debt-to-income ratio measures how much of your income goes towards debt repayment. If this ratio is too high, indicating that you’re already heavily indebted, banks may hesitate to extend further credit, fearing you may struggle with additional loan repayments.

Lack of Collateral: Personal loans are typically unsecured, meaning they don’t require collateral. However, if you’re applying for a secured personal loan and lack sufficient assets to pledge as collateral, banks may reject your application due to the higher risk associated with unsecured lending.

Incomplete or Inaccurate Application Information: Providing incomplete or inaccurate information on your application can raise red flags for banks. They rely on the information you provide to assess your creditworthiness and repayment capacity. Any discrepancies or missing details can lead to rejection.

Understanding these reasons can help applicants address potential issues before applying, increasing their chances of approval

Also Read: Understanding the EMI of a ₹2 lakh Personal Loan: A Comprehensive Guide

How to apply for a Personal Loan

If you are planning to apply for a personal loan online, simply visit the IndusInd website and fill out the required details, including your PAN Number, Mobile Number, Email ID, and current PIN code. Additionally, ensure you have the following documents ready:

• PAN Card
• Proof of residence such as Aadhar Card, Passport, or driving license in case your current address is different than your permanent address

Make sure you meet the eligibility criteria listed below:

• Applicant must meet the personal loan eligibility requirement of being at least 21 years old.
  • Maximum age at personal loan maturity should be 60 years or retirement age whichever is earlier.
• Applicant must be an Indian citizen or resident
  • Minimum net monthly income should be Rs.25000 for personal loan online application
  • Should have completed minimum 2 years in employment and minimum 1 year in the current organisation.

Conclusion

In conclusion, understanding the common reasons for personal loan rejections empowers applicants to address potential issues, increasing their approval chances. Consider instant personal loans from IndusInd Bank for convenience and ease of access to personal loan solutions. Click here to learn more about things you must keep in mind before applying for a personal loan online.

Apply for a personal loan with IndusInd Bank today!

Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.