Personal loans are very useful and easy to avail. The features like being multipurpose or unsecured in nature have made a personal loan one of the best-selling credit products of the present credit market. Though personal loans are the highest selling credit product, it is never true that anyone who applies for a personal loan gets an approval. As personal loans are not backed by any of the assets of a borrower, the lender becomes stringent while gauging the creditworthiness of a loan applicant. There are many reasons which can turn down a personal loan application. Here are some reasons that can make your personal loan application get rejected.
- Low credit score
- High debt to income ratio
- Insufficient documents
- Mistakes in the loan application form
- Not having a regular income
- Address listed in defaulter’s list by the credit bureau
- Income less than Rs. 20,000 per month
- Lower or above the accepted age limit
- Past defaults
- Employed by a non-listed company
The above mentioned 10 reasons are the most common causes of rejection of a personal loan application. Beyond those ten reasons, there are some unusual reasons too which can make a lender reject a loan application. One of those uncommon reasons for personal loan rejection is – Multiple Loan Applications.
Along with many other eligibility criteria, a personal loan lender checks when you applied for the last personal loan. The frequency of applying for a personal loan also makes an impact on the approval or rejection of a personal loan. Let’s understand why a personal loan application is checked by the lender.
Applying for a personal loan has become very easy as one can apply it online. Because of the advantage, loan seekers can easily apply for a personal loan from multiple lenders at the same time assuming that in this way we can find the best lender and the best deal. But the lesser known fact is that multiple application of a personal loan can lead you to get rejections from all lenders.
When we apply for a loan from any lender, we need to provide our personal details such as name, contact number, PAN card number etc. By using our details, the lender checks our credit rating. Each time a lender checks your credit rating, it gets recorded by the credit bureaus. In this way, a lender will get the information that you when was the last time you applied for a loan. Not only the application, but the lender will also get information if your loan application was approved or rejected and if rejected, what was the reason of rejection.
The second adverse effect of applying for multiple personal loans is the falling of credit score. When you apply for personal loans very often, this shows credit hungry behaviour of yours. Such an attitude of a loan seeker towards loans is considered unacceptable by the credit bureau as well as the lenders. Multiple loan applications are one of the main reasons that hurt credit score of an individual.
What is the Ideal Frequency of Applying for a Personal Loan?
The ideal frequency of applying for a personal loan may differ from person to person. Generally, the gap of 6 months should be maintained between two personal loans. But if your need is too high and you are financially strong enough to pay both the loans without any hiccups, you can apply for a loan. If you are in an urgent need of money, you can better opt for an instant personal loan. But the point to notice is that the lender will check your loan repayment habits and your Fixed Obligations to Income Ratio (FOIR) to check your repayment capacity. If you have missed or delayed any of the EMIs of the ongoing loan, your new loan application is likely to get rejected.
The Escape Route
Applying for multiple personal loans at the same time is undoubtedly one of the biggest mistakes of personal loan. Instead of applying, one can check the loan details of the lender before you apply for personal loan online. In this way, neither your credit score will hurt nor will it be recorded by the credit bureaus.
The next way of getting information on any particular lender is by calling the service centre or messaging the customer support team of the lender. This way, you can confirm your creditworthiness of yours before you apply for the loan. The chances of loan rejection can be minimised if you are assured of your creditworthiness with that particular lender.
The third way out is availing a personal loan top up. A personal loan top up is one of the best alternatives of a personal loan provided you have an ongoing personal loan. If you have an ongoing personal loan, you can easily avail a top up on your personal loan if you have a record of disciplined repayment.
Personal loans are always beneficial if you use it sensibly. A few measures such as checking credit score before applying, maintaining the FOIR, being disciplined in repayment of the loan are some of the things that one has to take care of. If you want to apply for loans without much time gap, be assured that your credit score is good, your repayment history is excellent and your income is sufficient enough to repay both the loans.