Personal Loan Rejection

Top 6 Reasons for rejection of your Personal Loan

Applying for a personal loan without due deliberation can lead to its rejection. The next time you try to qualify for a loan, bear in mind the reasons for which the loan may get rejected so that you can stay away from those reasons. Here are the most common reasons why your loan application gets rejected.

  • Not meeting income criteria

    Before granting a personal loan, lenders want to ensure that they will get it back on time. To ensure timely repayment of the loan, lenders check the income of the applicant. Adequate and stable income shows that you will be able to repay all your EMIs on time. This is the reason why it is easier for the salaried employees to get a personal loan as compared to the self-employed, as the salaried employees have a fixed income amount and sources. Generally, most lenders have defined a minimum income requirement for the salaried and self-employed and if you have applied for anonline personal loan amount that is more than your eligibility, your loan application is likely to be rejected.

    What can you do?

    To avoid this situation, you should talk to your lender before filling out the application form. Additionally, you can look for NBFCs (Non-Banking Financial Companies) where your annual income is not the most important consideration. However, it is always better to calculate your loan eligibility amount as per your income, so that you can avoid applying ruthlessly and getting rejected. You can use Poonawalla Fincorp Personal Loan Eligibility Calculator to know the best offers on personal loans as per your income.
  • Multiple Loan Inquiries and Applications

    When you inquire online about personal loans from different lenders, you can often apply for personal loans at multiple lenders. However, note that every time you apply for a personal loan, the lender checks your credit report with the credit bureaus and checks your credit score. Credit bureaus treat these as hard inquiries and mention them on your credit report which negatively impacts your credit score.

    What can you do?

    For this reason, the option to avoid rejection of a personal loan is to apply through an online lender like Poonawalla Fincorp.
  • Low Credit Score

    A credit score is a number between 300 and 900, which basically reflects your creditworthiness and hence, plays an important role in the lender's decision to grant the loan. Generally, lenders have a threshold credit score for approving personal loans. If your credit score is below this limit, you will not get the loan. Applicants without a credit score may also face rejection because, without a credit history, your lender will have no way of assessing your financial habits.

    What can you do?

    Generally, a credit score of 750 and above is considered ideal for loan approval. If your credit score falls below this, improve it with the right practices. Alternatively, you can approach NBFCs for personal loans as they have lower credit score requirements than banks. However, NBFCs also charge higher interest rates on personal loans than banks.

    If you do not have any credit history, avoid approaching a lender with whom you do not have any history (such as no savings/salary account or deposits) as they may reject your loan application. In such a case, approach the lender with which you have a salary account or existing relationship. Another great option that you can try is to apply for a secured personal loan such as a loan against a fixed deposit.
  • High Current Debt

    Another reason for personal loan rejection is when your existing loans are at a high level. If you currently have a lot of open credit accounts, such as credit cards and loans, your potential lender where you are applying for a personal loan will consider that you have a high credit burden and end up in default. Your high debt may put you at risk in the eyes of the lender, which may result in the rejection of your loan.

    Sometimes, many borrowers deliberately reduce their existing loan repayments in the hope of getting a higher loan amount. However, this can easily go wrong as lenders will refer to your credit report including all your current debt obligations before approving the loan amount. Hence, this type of misinformation can also lead to the rejection of your loan application.

    What can you do?

    Make sure you only borrow loans and credit cards as per your repayment capacity, as and when required. Avoid taking out more than one loan if you cannot pay them off fairly. Also, even if you have taken multiple loans, keep a clean repayment record and ensure that the ratio of secured and unsecured loans is balanced. The number of unsecured loans should be less compared to secured loans.
  • Unstable Employment History

    Your profession and employment history play an important role in personal loan approval. Lenders prefer to give loans to people working in reputed organizations. So, if the company you are working for is unregistered or not listed, your application may get rejected. Also, most lendersoffer personal loans to people who have a stable history of employment. If you do not have a stable job or have a history of quitting at times, your loan application is likely to be rejected. Most lenders want a customer with stable employment or business and regular income. People who change jobs frequently are considered less qualified to get loan approval by the lenders or the personal loan interest rates offered for those individuals are higher.

    What can you do?

    Maintain a good employment record to ensure that your application for a personal loan is approved. In general, personal loan lenders expect you to have at least three years of work experience, with at least one year of experience in an existing organization. In the case of self-employment, your business should be in existence for at least three to five years. However, it may differ across lenders.
  • Wrong/ Missing Documents

    Your loan application is approved only after the verification of your documents. If any document is missing or there is information inconsistency in your documents, your lender will reject your loan application. Your loan application form is as important as the other documents that you submit along with it. The details given in your loan application like your name, age, income, and address are important for the lenders to generate the necessary information about you. If the lenders find an inaccuracy in any of these details mentioned in your loan application, your loan request will be rejected.

    What can you do?

    Check the list of required documents beforehand and be ready with these. If you are applying for a personal loan online, carry the scanned copies of all the documents, and if you are applying offline, carry the original along with the required copies. Also, make sure that your original documents are in good condition. When it comes to your application form, fill in the details carefully and avoid overwriting.Provide the necessary information precisely without spelling mistakes. Fill in your name and address details as mentioned in your KYC documents. Also, double-check the information you have provided before submitting your loan application.


    While a personal loan keeps you ready to face any financial crunch, it is equally important to be able to avail of this loan. If your loan application is rejected once, it gets recorded in your credit report, leaving you unable to borrow money easily. It is advisable to keep the above points in mind and apply only if you are sure that the loan application will not be rejected. If you feel that you are lacking in any parameter, it is better to make corrections and then apply.

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