Personal Loan is one of the most popular types of credit available in the market. Various lenders offer Personal Loan such as new-age NBFCs, banks, and government institutions. Before applying for a Personal Loan, an individual must meet all the eligibility criteria to avoid rejections. Personal Loans can be used for multiple purposes such as home renovations, weddings, travel, higher education, etc. There can be various Personal Loan rejection reasons – as a borrower, you must keep an eye on the factors that lower your Personal Loan rejection factors.
- Build a good credit score
If you have a credit score of more than 750, it is considered a good credit score. An individual with a good credit score is more likely to get a higher amount of loan with a lower interest rate. An individual with a poor credit score is considered less creditworthy as compared to an individual with a good credit score. Hence, a borrower needs to build a good credit score. To build a good credit score, you should make timely payments.
- Check your credit score at regular intervals of time
To avoid a Personal Loan rejection, it is a good habit to check your credit score at regular intervals of time. There are various websites where you can check your credit score for free. When a borrower checks their credit score, it is considered a soft inquiry. A soft inquiry doesn’t impact your credit score adversely, in fact, the impact is neutral. However, when a lender asks for your credit report multiple times, it affects your credit score negatively – such a case is considered a hard inquiry. It is a good habit that a borrower must check his/her credit score before applying for a Personal Loan.
- Compare all the lenders
A borrower can ask for credit from various lenders including a bank, NBFC or any other authorized lender. These various lenders offer different features and benefits. Before applying for a Personal Loan, you must compare all the lenders including the offerings such as loan amount, tenure, rate of interest, additional charges such as processing fees, etc. this will help in choosing the most suitable lender. You can check all the information published on the various websites as well on the official website of the lender.
- Choose tenure based on your repayment capacity
There are various monthly expenses that an individual must endure which impact his / her overall capacity for repayment. These monthly expenses include living costs, investments, savings, insurance premiums, existing EMIs, expenses such as bills, and other mandatory expenses. At the time of loan approval, a lender considers all these factors before your loan approval. Hence, a borrower needs to opt for the loan keeping income and expenses in mind. To reduce the repayment burden, you can make a high down payment, opt for longer loan tenure, and foreclose the existing debts. This will help you in reducing the overall debt burden.
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Understanding your repayment capacity will help your plan your EMI better. You can use the EMI calculator – online and manually, to plan your EMIs. It is a good practice to plan your EMIs beforehand and once you find out the right repayment capacity – you can opt for shorter loan tenure to reduce the interest. This will reduce your chances your default and helps in reducing your Personal Loan rejection chances in the future.
- Avoid Frequent Job Switches
There are various eligibility criteria that a borrower must fulfil which include income, age, employment stability, credit score, etc. As a borrower, you must have a stable job with more than a year of experience with the same company. A lender is more inclined towards a borrower with a stable income and job. On the other hand, a borrower with frequent job changes might face loan rejection or a loan at a higher rate of interest. In case you are planning to apply for a Personal Loan, you must avoid frequent job switches.
You must check all the requirements beforehand to avoid any sort of Personal Loan rejection. The above-mentioned Personal Loan rejection reasons will help you plan your Personal Loan smartly. Irrespective of the region, you can apply for a Personal Loan with confidence. For example, if you are a borrower you want to apply for Personal Loan in Bangalore, you can check the above-mentioned Personal Loan rejection reasons and make an informed decision accordingly.