GURUGRAM, INDIA / ACCESS Newswire / May 29, 2025 / Personal loans are one of the most popular forms of credit, offering quick and instant disbursal, minimal documentation, digital applications and no restriction on end use. Whether it's managing an education, home renovation, marriage or emergency expense, consolidating debt, or funding a large purchase, personal loans can provide timely financial support. Over the years, online financial marketplaces and digital lending platforms have further simplified the loan application process. Today, you can compare multiple lenders, check your eligibility, and apply for a personal loan - all from the comfort of your home. The turnaround time has reduced significantly, and in pre-approved offer cases, borrowers can receive funds in their bank account within minutes to hours of approval.
Despite their ease of access, many applicants face rejection due to not meeting eligibility criteria. Being aware of the common reasons behind personal loan rejection can help you take the right steps to strengthen your application and improve your chances of approval.
Lower Credit Scores
Most lenders require a credit score of 750 or above to approve personal loans. A low credit score indicates poor repayment history and higher credit risk for lenders, which can lead to rejection. Some lenders may still approve a loan application for low-score applicants, but usually at higher personal loan interest rates.
Tips to Improve Credit Score:
Pay EMIs and credit card bills on time.
Avoid applying for multiple loans or credit cards in a short time.
Build credit history by using and responsibly repaying a secured or regular credit card.
Check your credit report periodically for errors or fraudulent activities.
Report any discrepancies to the relevant lender and credit bureau for correction.
Your EMI Burden May Be Too High
Lenders prefer to approve applications whose existing and proposed EMIs are within 50%-55% of their net monthly income. If your total EMI outgo exceeds this threshold, your application may be declined. For instance, if you apply for a Rs 5 lakh personal loan, have a monthly income of Rs 60,000 and have no debt, your EMI should not exceed Rs 33,000.
How to Fix It:
Opt for a longer repayment tenure or prepay to lower your EMI.
Reduce your loan amount to make repayments more affordable.
Use an EMI calculator to estimate the optimal EMI and repayment tenure
Applying with Multiple Lenders
In each loan application, lenders will obtain your credit report (such a fetch is known as a hard inquiry) from the credit bureaus to evaluate your creditworthiness. This can lower your credit score slightly. Several applications in a shorter duration signify desperation and risk, leading to fewer chances of approval.
Your Profession or Employer May Not Qualify
Some banks and NBFCs maintain a list of preferred employers and occupations for approving personal loans. Your application might be rejected if:--
Your employer is not on the lender's approved list.
Your occupation or profession is considered high-risk or falls on their negative list.
You're self-employed in a business sector not supported by the lender.
Applicants should always check lender-specific eligibility criteria based on their profession and employment before applying.
Frequent Job Changes
Lenders assess employment stability as a key factor for approving personal loans. Frequent job changes may signal financial instability, leading to a higher credit risk for lenders. Some banks require a minimum of 1 year of continuous employment with the current employer.
Tip: If you're planning to apply for a personal loan, check the minimum job tenure criteria and avoid switching jobs frequently in the short term. For instance, SBI requires a minimum of 1 year of work experience for corporate sector employees and 6 months for employees working in the government or defence sector.
What to Do After a Loan Rejection
If your loan application is rejected, the first step is to understand why it happened. Review your credit report and look for red flags such as late payments, high credit utilization, or incorrect information. Improve your credit profile, reduce your outstanding debts, or limit your credit card EMIs, and wait a few months before reapplying. Consider applying for a lower amount or checking pre-approved offers through your current lender or online marketplaces. You may also opt for secured personal loans if you're unable to get approval based on your current credit profile.
Contact Details:
Name - Marketing Planners
Mobile number - 9811815536
Designation - Content Marketing
Webiste - https://www.paisabazaar.com/
SOURCE: paisa bazaar
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