Among loan options, Personal Loans are one of the easiest ways to secure short term finance for travel, marriage, home renovation or any emergency purposes. However, some people face rejection when it comes to their loan application process. To avoid such circumstances, you should refer to these common reasons why your Personal Loan application might get rejected.
 

A) For Salaried Individuals:

Low Credit Score
After you apply for a Personal Loan, one of the first things the lender will do is to check your credit score. The score above 750 is considered to be an excellent score and the person and has the lowest risk rating. The loan approval process is also quick and hassle-free. If your CIBIL is minus 1, then it means you have not taken any credit or loan till date and your Personal Loan amount will depend on your current salary.

Low Income
Generally, most of the lenders have defined minimum income requirement and if you have applied for a Personal Loan amount, which is more than your eligibility, then your loan application is likely to get rejected.

Higher Existing Debts
If you currently possess too many open credit lines, such as credit cards and loans, your prospective lender will consider that you are over burdened with credit and may end up in default. Your high debts make you stand at risk , which may result in your Personal Loan rejection.

Multiple Credit Inquiry Requests from Lenders
A section of credit report highlights all loan queries by the prospective borrower. Multiple and parallel credit queries within a short period can further increase chances of loan application rejection. It reflects the desperation to get a loan and your inability to get a loan from financial institutions. Hence don’t let your direct sales agent (DSA) hit at multiple lenders.

Job Instability
Financial stability is highly valued when it comes to providing you a loan. If you switch jobs frequently or do freelance work which is volatile, there are high chances that your loan application might get rejected.

Inaccurate Details in Loan Application
If the details regarding your name, residence, phone number and other account details are inaccurate, it will be difficult to generate the necessary information about you. Without the right information, it is impossible for the banks to approve your Personal Loan

Incorrect Loan Purpose
Unsecured loans like Personal Loans generally do not emphasise loan purpose and they come with a great deal of flexibility on how to use the funds. However, few lenders may not allow you to utilise the loan amount for specific purposes like a child’s education, stock investments, or prohibited activities such as gambling.
 

B) For the Self-Employed

A Personal Loan for the self-employed can be used to meet both personal as well as business needs and here are a few reasons for rejection of Personal Loan for the self-employed.

Business Stability
Trusted lenders such as HDBFS require business stability of minimum 3 years before approving a Personal Loan to the self-employed. The inability to meet this minimum tenure of business stability can lead to the rejection of a Personal Loan application.

Annual Income
The higher the annual income, the higher are the chances of getting a Personal Loan approved.

High-Risk Profile
People in occupations such as lawyers, police, real estate contractors and builders, where their income cannot be thoroughly assessed, are treated as high-risk profiles by lenders. A Personal Loan rejection is most likely in such situations.

Insufficient Cash Flow
Your cash flow analysis shows your capability of repaying your loan, after covering operating expenses. Insufficient cash flow affects the confidence of lenders

Other Factors
Besides the above-stated factors, miscellaneous reasons such as multiple loan applications with different lenders, not meeting the age criteria, poor credit history, settlement of existing and past debts, etc., can lead to the rejection of Personal Loans for self-employed.

Armed with knowledge of how to rectify shortcomings in your Personal Loan application, you are sure to get a quick approval. A Personal Loan for HDB Financial Services is the one stop solution for any individual seeking financial assistance. HDB’s Personal Loan serves multiple purposes for both salaried and self- employed individuals.