The process of making a personal loan seems easy, but only to realize that there are numerous loan applications that are turned down. Income is not the only reason why people are rejected when taking loans. There are several factors that are evaluated by the lenders to determine whether an applicant is a safe borrower. Knowing such true causes may assist you in being more prepared and having better chances next time.
Low or Unstable Credit Score
A low credit score is one of the most frequent causes of rejection. The score of your credit is an indication of the way you have managed previous loans and credit cards in a responsible manner. Late payments, missed EMIs or defaults on your loan give you lower points. Even the repeated loan enquiries in a short span can be a warning to the lenders of financial strain. A personal loan company in Delhi, India has to face most banks and NBFCs that do not like an unstable credit record before they can approve an application.
High Existing Debt Burden
In case you are already paying such a significant percentage of your monthly salary in EMIs, lenders might view you as over-leveraged. This is calculated by the fixed obligation to income ratio (FOIR). The high FOIR will indicate that you will not be able to repay a second loan. This is one of the main causes why most applications are rejected by the banks as well as the individual loan providers in the setup of Delhi, India.
Unstable Earnings or Employment
Borrowing companies appreciate certainty. Freelancers, self-employed people or those who change jobs often might be rejected because of irregular earnings. Salaried workers can be dismissed as well in case they are still on probation. Stability will give the lenders confidence that the repayments will run without hitches during the tenure of the loan.
Lack of Documentation
Easy mistakes are enough to be rejected, too. Out-of-place signature, address evidence that is out of date, or lack of bank statements inhibit verification. At other instances, applications are simply rejected when documents fail to be verified. The same is true regardless of whether you are approaching a personal loan company in Delhi NCR, India.
Age and Eligibility Requirement
Each lender has a certain age restriction, income level and work criteria. Those who do not meet these requirements automatically are reinstated. An example is that an individual who is near retirement can be perceived as a greater risk because he or she has fewer earning years to live.
Employer or Location Risk Factors
Certain lenders have in-house lists of companies and industries that are known to have a high turnover. Likewise, the situation may be problematic among the candidates who can be identified as living in the areas that can be deemed unstable or difficult to check, even under the condition of using individual personal loan companies in Delhi, India.
Too many loan applications are being processed concurrently
When lenders are applied to simultaneously, there is a risk of decreasing the chances of being approved. Each application raises a credit enquiry, and excessive enquiries within a limited period of time cause suspicions of a rush or necessity to get credit.
Conclusion
Rejection of personal loans is normally caused by several minor reasons and not one big one. Making credit habits better, limiting current debt, document accuracy, and selective application can go a long way in improving the outcomes.
Loan Guru functions within the lending ecosystem to provide clarity and guidance to the readers to grasp the loan eligibility and application issues with ease to be able to make informed financial decision-making in an easy manner.
