how to keep your personal loan application from being turned down
This article particularly deals with looking into the various issues surrounding the rejection of a personal loan application. The loan application is approved or rejected based on a number of background processes that start up once the user logs in.
1) CIBIL Score
For consideration, your credit score, also known as cibil, must be at least 750. This is the justification for why everyone needs to get a credit report before applying for a loan, as it might take some time before you can apply for another loan if your first one is turned down (i.e. after a minimum of 6 months)
2) Documents mismatch / document fabrication
People often lose focus when fabricating documents like pay stubs in order to qualify for a larger loan amount when they are in desperate need of money. It seems that banks are difficult to manipulate. Your chance of ever applying for loans elsewhere for the rest of your life is gone the moment the bank where you made your application discovers a mismatch in your supporting documentation.
3) Exceed repaying capacity Limit
This occurs when the person makes a loan application, but it’s unclear whether he will be able to afford the interest. Each person is only allowed to pay emis a certain percentage of his income; the remainder must be used for living expenses. Banks typically view such situations with caution if the customer is already paying for a credit card or loan EMI.
4) Customer Profile Score for each loan portfolio presented, the bank rates the profile on various aspects such as the income, residential stability as well as previous financial records. Every bank sets a minimum score requirement that the applicant must meet.
5) Even the smallest of details matter, for instance, if there is lack of cooperation during the verification process (office verification, residence status verification so on), or sometimes the details provided by the customers are not 100% correct.
6) Having no loans or credit cards also make lenders wary, in this case the cibil score is usually a -1 or 0. Where -1 denotes complete lack of credit history and 0 denotes transactions that have not yet been updated on your report.
Now that you’ve seen the main causes of personal loan application denials, let’s look at the solutions—or rather, best practices—that can help increase your chances of getting approved:
1) Maintain a positive credit record whether it’s your loan or credit cards, ensure that you repay promptly, to have an acceptable credit score. Avoid making late payments or paying off your credit card because these are two of the most common reasons for a loan application to be denied.
2) Proper documentation
Even though personal loans only require a small amount of paperwork, it must be flawless in every way. Evidently, banks are difficult to play around with. Your chance of ever applying for loans elsewhere for the rest of your life is gone the moment the bank where you made the initial application discovers a mismatch in your supporting documentation.
3) Never exceed the repaying capacity
It is always a good idea to avoid getting into too much debt and to avoid taking out too many loans that you might not be able to pay back. Although banks will make sure you stay within the FOIR limit, being proactive and frugal with your spending will put you ahead.
4) Because you stand to gain or lose at the end of the loan application process, make sure you cooperate fully at all times.
5) Maintaining credit cards is always a good idea so that you have a history to use when applying for loans in the future.
While getting approved for a personal loan has always been a little tedious, applying has never been simpler. Your loan will be disbursed as soon as it is due as long as you comply with the requirements.
