Top 3 Reasons of Rejection of Personal Loan
By Anupama Deshpande | Jan 4, 2019

A personal loan is an unsecured loan (unsecured loans are those which are not backed by any collateral or security) which persons can borrow from any bank, NBFC or financial institution for a minimum period of 12 months to a maximum period of up to 60 months.

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A personal loan can be availed for multiple purposes. It is used to meet any kind of urgent financial need of the people like:

• Medical Expenses
• Debt Repayment
• Purchase of Expensive Item
• Attending a Wedding Ceremony
• Education Expenses

Whenever you want to avail a personal loan, the lender checks a few information about your credit score along with other things such as your income, your employer's details, repayment history, etc. before approving your loan.

Persons having a regular source of income and carrying a decent credit history are usually offered personal loans very easily and at lower interest rates too but there are some cases when lenders reject your loan application.

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There can be multiple reasons of personal loan rejections. Mentioned below are top 3 reasons of rejection of personal loan:

Credit score is considered as a measure of credit worthiness of any person. Credit score is important for lender to assess the risk of default. Due to poor credit score, many of the personal loan applications get rejected by the lenders. Credit score ranges between 300 and 900. Credit score above 750 is considered a good credit score. A person having credit score less than 750 may face an issue of his/ her personal loan rejection.

It takes care of paying off your EMIs in case of death, disability, loss of job or sickness.

If you have already taken a lot of loan and the loan to net income ratio is above 40% then the lenders may reject your loan application. In such a scenario, the lenders may consider that you are over burdened with debt and may end up in default.

Whenever you apply for a credit, the lender contacts credit bureau to get your credit report which is called an enquiry. The credit bureau considers such enquiries as has enquiries and mentions it in your credit report.

Though 'free credit score' or 'free credit report' is being offered by many websites, you yourself should not make too many enquires even if it is available free of cost. Too many enquiries has a negative impact on your credit score.

If there are higher enquiries, it will impact your credit report as well as your credit score negatively.