Personal loans can be beneficial when you want to purchase high ticket items for your new home, take a holiday or have medical emergencies. You can pay a personal loan in easy fixed instalments over coming years while using the money taken for present needs. But there can be certain reasons why your personal loan might not get approved even after carefully collecting and submitting the documents required for the loan. Here are some reasons to consider in case your personal loan is not getting approved:
- Poor credit score and debts: This is one of the prime reason for loan rejections. Since personal loan is an unsecured loan, the risk taken by the lender is higher compared to loans given against collaterals. Therefore, a low or poor credit score and large amount of debts on your accounts can be one the reasons why your personal loan is not approved.
- Multiple applications: If you have applied to many financial institutions simultaneously for loans, it can reduce your chances of securing a loan as your repayment capability drops. You must apply for another loan after one process of loan application is complete.
- Huge amount: If the amount of loan you are seeking is more than 30% of your income and the lender feels you cannot pay the EMIs, they can reject your application. Have a family member as co-applicant to avoid this situation.
Error in documentation: A simple yet often overlooked reason for loan rejection can be errors in documents required for loan. Incomplete information in forms, spelling errors in documents, withheld information- these can all be reasons for denial of a personal loan.