What to do When Loan is RejectedWhen your loan gets rejected, invest time in determining the reasons for loan rejection. Reasons can vary from one lender to another based on their individual terms and policies. Some common reasons for loan rejection can be insufficient income, low credit score, unstable employment, working for an uncredible company and not falling into the right age group eligible for loan.
Reapplication of loan is always an option for both personal loans and business loans, but first know what are the right steps to prevent loan cancellation again. Evaluate your debts and income to get clarity on repayment capacity, check your payment history, fix credit report errors, if any and confirm with your lender for any anticipated problems.
It is good to have patience during the waiting period after the loan application is submitted. Repeated applications for personal loan can lead to loan rejection. Multiple loan application in less than a month’s time gives a negative impact to the lender and causes loan rejection often.
Impact of Loan Rejection on the Credit Score
Besides documents verification, lenders assess the credit score to check a borrower’s credit worthiness. When the credit score is low and the loan gets rejected, it leads to a hard enquiry procedure that negatively impacts future loan applications and overall financial record. A good credit score helps to get personal loan at better terms with lesser rejections.
A low or high credit score is maintained and scrutinized by the credit information agencies. The agency is engaged in maintaining and analysing the records of credit related activities for corporates as well as individuals.
Improve your credit score in the following ways:
- Clear outstanding bills and balance amounts
- Limit your credit card expenditures till you have cleared the previous bill in full
- Avoid using multiple credit cards
- Transfer the maximum credit limit to a single credit card
- Maintain a gap of months between loan applications to sustain a good credit score
Nowadays, personal loan is applied online using instant loan apps that have paperless documentation process which enable quick loan approval. Below are the mandatory documents that are necessary to avoid loan rejection:
- KYC documents, inclusive of Aadhaar Card, Mobile Number Linked to Aadhar, Pan Card and Bank Account details
- Address proof on driving license/ Passport
- Account holder’s internet banking information
- Income proof such as salary slips for salaried individuals and financial statements with photographs for self-employed
- Employee details or business details such as name of the company, position at work place, work experience and job stability