Personal loans are one of the best ways to finance your immediate cash requirements. But getting cleared for a personal loan might have some hinges along the way. Have you ever wondered why even after having a perfect credit score your application for a personal loan got rejected? After all, nobody likes to go through all the paperwork only to get rejected after all the filing and the waiting around. Unlike in the past, only a great credit score will not ensure that you get through with a loan. Banks or any other financial institutions look at the whole package when giving out personal loans nowadays. So the here might be a few reasons why your loan application is getting refused even after your excellent credit score.
A personal loan is a type of unsecured loan; hence your income plays a very important role in determining if you will be able to sustain your monthly repayments. If your income is perceived to be too less for you to be able to sustain the repayments, your application may be rejected. The same is true if you are on probation or working at a temporary job. In addition to that, banks also consider the financial situation of your company and if you are paying other EMIs.
Invalid or wrong details
This is one of the many reasons why your application might be rejected. If you provide incorrect or faulty information and details may lead to rejection of your application
You need to be of a minimum age of 18 and less than 60 years to apply for a personal loan. But in most cases, people who are above the age of 18 and below 21 are also rejected for personal loans. The same is true for people above 60. The former group is usually denied because of regular income issues and the latter because income dips after 60 and hence it increases the risk of default.
Previously rejected loan applications
While checking your applications lending parties will look into the fact if you have been rejected for loans and credit before. This is hurt credit scores which in turn lead to loan application rejection.
It is not unlikely or unheard of for people to shift jobs for better opportunities and a rise in income. But this same step might go against you when you are hoping for your personal loan application to be approved. Frequent job changes translate to mean job instability for lenders.
So, next time you apply for a personal loan and still get rejected for it, you know what to blame for it.
Que1. How long does a declined loan stay on your credit file?
Ans- A declined loan stays on the credit file for 2 years and affects the score no longer than 1 year.
Que2. Can you be denied a loan after pre-approval?
Ans- A pre-approval is not a guarantee and therefore there are possibilities of getting denied.
Que3. Why do loans get rejected?
Ans- One of the most common reasons behind a loan rejection is either bad credit or no credit, the lenders look at the borrowing history.
Que4. Does the reason for a loan matter?
Ans- It entirely depends on the lender
Que5. Does getting turned down for a loan hurt your credit?
Ans- No, the loan denied in and of itself will not hurt your credit.
Que6. How many points does your credit score go down when you are rejected?
Ans- There may be a slight decrease in your credit score.
Que7. What is an excellent credit score?
Ans- A credit score above 800 is considered to be excellent
Que8. How long should you wait to apply for a loan after being denied?
Ans- One should wait for at least 4 to 6 months before applying for a loan after being denied.