7 Reasons Why Your Personal Loan Application May Get Rejected in India

If you are facing a cash crunch or need money urgently, personal loans can help. However, this can be a long and tedious process and there is a risk that your application gets rejected if you’re not on you’re A-game when applying.

Banks are extremely cautious while approving loan applications and they evaluate the applicants based on numerous parameters to determine their ‘credit worthiness’. Keep in mind these 7 reasons why banks may reject your personal loans application:


  1. Insufficient Income

One of the major factors that influence a financial institution’s lending decisions is your income. They want to ensure that your income can sustain the monthly repayment of the dues.

If your income falls short of the minimum criteria set by the bank, your application will get rejected. Check this minimum requirement before filling out the application. If you do not meet the criteria, it would be better to not apply to such banks as a rejection can lower your CIBIL score.

Another reason for rejection may include your employer not being on the companies approved list of the bank or if a significant portion of your salary is based on sales commission. If the banks have any reason to doubt your current and future financial stability, they can say a hard no to your loan application.


  1. Bad CIBIL Score

All banks will inquire about your CIBIL score to check your re-payment history to determine if you are worthy of being given credit to or not. Some banks require a minimum CIBIL score of 750 to even consider your application. Any history of frequent defaults, non-payment of credit card bills will result in a poor payment record which will deem you as a risky borrower. Banks also check the number of recent hard enquiries on your report. If you have a certain number of hits in the recent past, it will indicate a credit hungry behaviour


  • Job Instability

It goes without saying that the money lenders look for job stability in those applying for a personal loan. In fact, some institutions may require you to be employed with the same company for at least three years to be eligible for the loan. If the lenders doubt the future stability of even the employers, they reserve the right to reject the loan application.

If you have a temporary job, are on probation or have a history of switching jobs frequently, your application may get declined


  • Rejection of Previous Loan Applications

While getting personal loans online is easy, with new financial options available every day, you should not apply for a lot of loans frequently (especially if there’s a chance of rejection). If your loan applications have been rejected in the past, then it would impact the credit score negatively. As a result, there is a chance that the current application also gets rejected.


  • Incomplete Paperwork

One of the main reasons why even the worthiest of applications get rejected is due to incomplete paperwork. It is obvious, but don’t take it for granted and make sure you review your application to ensure that is it complete and accurate before submitting. If some important documents are not submitted or are incomplete, it would give the financial institutions a firm reason to reject your application. Complete the paperwork carefully and submit all the necessary documents to support your case as banks will verify all the details. Any inconsistency will lead to the rejection of your application.


  • Poor Credit Score of Your Co-Applicant

If you include a co-applicant on the loan application to increase the loan amount, you must remember that the credit score of the co-applicant will also be considered. If your credit score is good but that of your co-applicant is bad, there is a chance of the application being rejected.


  • Too Many Loans

Most banks check your debt to income ratio in order to understand your repayment capacity. If you are already defaulting or are drowning in existing loans, it will raise a red flag to the banks as a significant portion of your income would be going to fulfil your current obligations. This would make it more difficult to pay for the loan you would be applying for. Banks consider such applicants to be risky even if they have a good CIBIL score.

Applying for an instant loan from a bank may be difficult as compared to non-banking financial institutions as the former has stricter eligibility criteria. If you’re in need of a personal loan and think that your application has a chance of being rejected, you can always try to download MoneyTap, India’s very first personal credit line app that offers a line of credit from where you can take instant personal loans almost instantly or use it as a credit card when needed.

Author: Chakraborty

Dr Chakrabarty is the Chief Innovation Officer of IntuiComp TeraScience. Earlier she was Assistant Professor of Delhi University, a QS ranked university in India. Before that she has held research positions in IIT Mumbai, IIT Chennai and IISc Bangalore. She holds 2 patents and over 20 research publications in her name which are highly cited. Her area of research is in smart technologies, integrated devices and communications. She also has a penchant for blogging and is an editor of Business Fundas.