Instant personal loan is one of the most demanding financial tools. With endless benefits, these loans can solve major financial crunches. The loan application process is also easy with various online mobile apps or banking apps. Even the loan approval process is also quick which makes it more convenient in urgent unforeseen situations.
When anyone applies for an EMI loan online, the lender will review their loan repayment capabilities. It is very common for personal loans because these loans are unsecured loans. No security or collateral fee is required for a personal loan. As the lender will review the detailed financial strength of the borrower, sometimes the loan application gets rejected. Here are some common reasons behind the rejection of the loan application.
- Poor credit score: Credit score is a very crucial index for personal loans. It is such a factor that indicates the financial behavior of the borrower. For example, it can denote credit utilization, payment history, previous EMI payments, previous details of loans, etc. In case the borrower has a lower or poor credit score, it is likely to get rejected.
- Error Credit reports: Credit report is another factor behind the loan rejection. In case there are any mistakes or misleading information about the borrower’s financial status, the lender may reject or face troubles on getting approved loans online. It is the responsibility of the borrower to review major information like personal details, PAN card details, KYC details, loan details, etc.
- Higher debt: Annual income matters to avail of online personal loans. The lender will check whether you have higher debt with a comparatively lower income or not. In case the income is lower than the debt burden, the lender may hesitate to approve the loan. Besides, having too many loans within a short time period can also lead to rejection of the application.
- Frequent loan inquiry: Before approving the loan, lenders may check or inquire details of the borrower. Usually, two types of inquiry take place: hard inquiry and soft inquiry. If there are multiple loan inquiries under the borrower’s name on a particular instant loan app, the lender may reject the loan application.
- Inappropriate documents: Documents are crucial for any kind of loan approval. Documents like ID cards, salary slips, residential proof, etc are used to understand the borrower’s credibility and trustworthiness. Without a proper list of documents or incomplete documents, the lender can reject the application at any time.
How can one avoid loan rejection?
To avoid loan rejection on any of the personal loan app, you must follow a few tips as follows.
- Improvement in credit score: Credit score is the most important factor for loan approval. The borrower should take care of it properly. A higher credit score(above 600) is always an acceptable credit score. When the credit score is above 600, the lender will identify the good financial ability of the borrower and it will ensure the loan approval.
- Proper documentation: The borrower should make sure of the complete list of the documents. Besides, they should have all the correct information in the credit report. A completely correct credit report is highly appreciated by lenders or any online loan apps.
- Strong financial profile: The borrower should not take multiple loans over a short time. They should have a debt-income ratio below 35%. It makes sure that the borrower is capable enough to repay the loan on time.
- Stable employment: Stable employment is another important factor. Any lender prefers to choose borrowers who have a stable source of income.
Conclusion:
Personal loans are the real game changer for many during the financial unstable situation.
The emergence of several online platforms has especially made the application process easier. The only thing a borrower must keep in mind is proper documentation with a higher credit score. So, acquire online personal loans from any reliable mobile app and get all-rounder financial assistance.