We all know personal loans are the best way to meet our immediate financial needs. The prime reason being that it does not require any collaterals. But do we really know the chances that our personal loan application will be approved or rejected? No! It’s quite impossible.
There can be ample reasons as to why your application for a personal loan can be rejected. Such as very low credit score, frequent job changes, your PG accommodation and late EMI payments and so on.
However, you don’t want to repent your decision of personal loan later on. Isn’t it? So, we have come up with 3 important steps which should be avoided, while you apply for a personal loan.
Too many enquiries
You decide to take a personal loan. But you want the best deal too. And you jump on the internet to have a look around. To be safe you apply to at least 4-5 lenders. But frankly speaking, every time you apply for a personal loan, it will be noted as an enquiry on your credit report.
The more number of enquiries you have, the higher the risk you are for next lender. They consider that you may have been rejected by your previous lenders. You may face rejection again, eventually reducing your credit score. The major lenders don’t even consider an application with 2 enquiries in six months. No lender entertains a borrower with low credit score.
Recent delayed payments
You may have missed payments in the past. But the delayed payments in your recent credit report hurt your credit score even badly. Too many late payments done recently will drastically bring down your credit score (more so if you have maintained a high credit score till then).
The extent to which a late payment affects your credit score depends on – how late you were, how frequently you paid late and how much fresh it is. This differs from lender to lender. But hardly does any good to enhance your loan application. We highly recommend you to set reminders for EMI payments.
Two aspects of your Employment
Your employment can make a difference between approval and rejection of your personal loan by these two factors—salary in cash/cheque and job change in last 3-6 months
If your employer pays you in cash or a cheque, there would be no physical documents to prove it. Hence the chances of your loan getting approved will be lesser. On the other hand if you are working with an MNC, you are more likely to be paid through online transfer. Having a documentary proof of your income makes your loan approval speedy.
Secondly, if you changed your job in the last 3-6 months, the lender may infer that you may change again in the next few months. Eventually, increasing the possibility of loan default in their opinion. Also, if you are serving a notice period, your loan will not be approved until you join a new one, and no disbursement until you receive the first salary.
Scenarios where you may face rejections
Low income
Negative field verification
Poor banking behavior
If you do not meet the minimum age criteria
Unauthorised employer
(Author is the founder & CEO of Qbera.com)