Banks and other financial institutions offer a range of loans to fulfil various needs. The loan application process has become faster and more advanced thanks to technology. As a result, people might have simple access to loans now.
The Personal Loan is India's debt market's most famous loan product. Because these loans are unsecured, many potential borrowers choose them.
This blog includes a list of strategies you can use to prevent having your Personal Loan application rejected. This blog contains some of the dos and don'ts that can help you increase your eligibility for Personal Loans and avoid having your loan application or request rejected.
So, keep reading to find out how to get your application for loan sanction approved swiftly!
Any circumstance in which a person borrows money for a personal purpose, including making investments in a business, is referred to as a Personal Loan (also known as a Consumer Loan). Additionally, these are the three components shared by all Personal Loans-
The promissory note is retired once the loan's repayment conditions are satisfied. If agreed-upon loan payments are not made, the lender may take legal action to recoup its funds.
While most lenders set straightforward eligibility requirements to make it easy for all applicants to get loans, there may be occasions when your application's status is left uncertain.
However, you can protect your Personal Loan application form from being denied by the lender by taking a few steps as the applicant. Here are some pointers to prevent loan denials or loan rejections:
A lender's primary metric to assess repayment capacity is FOIR or fixed obligation to income ratio. Any rent you pay, any unpaid EMIs, regular payments you make on investment-linked products, and the typical monthly costs for sustaining your standard of living are all examples of fixed obligations.
Make sure your fixed expenses don't consume over 40% of your monthly earnings. Although lenders' precise cut-off point ratio ranges, it is generally between 40% and 50%. A low FOIR makes you a better candidate for a personal loan because it indicates to lenders that you have more money available and can make your EMI payments on time.
The ratio of credit you have used to the credit you have available is known as the credit utilization ratio. It would help if you aimed to keep this below 30% before applying for a Personal Loan.
If your credit utilization ratio is incredibly high, you might be denied a Personal Loan. Restricting your credit utilization is another easy way to prevent your Personal Loan application from being rejected. If you have more than one, distribute your recurring expenses among your credit cards.
By doing this, you can show that you are not reliant on one specific credit card. This also helps your credit utilization because it demonstrates that you can live a decent life.
You should not only use your credit card as little as possible, but you must also pay off all balances on time and in full. You may be charged interest if you pay off your credit card debt in smaller sums or instalments.
However, when you apply for a personal loan, the lenders will be more confident in you because you have a history of paying your bills on time each month. Make sure to pay off all of your debts on time to maintain a healthy credit history.
Keep in mind that lenders typically only lend to people with good money management skills. Therefore, if you have multiple loans, lenders might refuse to give you more money because they believe you won't be able to manage the money well.
Another reason is that having several loans reduces your credit limit and makes it more challenging to take on new debt.
A mistake on the application form is among the most absurd and frequent causes of rejection for Personal Loans. Keep in mind that most lenders use outside organizations to validate your applications.
They would immediately reject the loan application if they found a misrepresentation. As a result, be sure to check the loan application thoroughly and accurately yourself.
Before lending you any money, banks and other lenders prefer to see that you have a reliable source of income. They may therefore view you negatively for a Personal Loan if you have changed jobs too frequently in a short period.
Before requesting a Personal Loan, many lenders demand that you remain employed for a minimum of three years. Keep in mind that different lenders have different eligibility requirements for Personal Loans. Thus, before you apply for a loan, make sure you speak with the lender directly and comprehend their needs.
Even though your salary might be your primary source of income, it's advantageous to show lenders any other sources of income you might have.
For instance, you should list these sources when applying for a Personal Loan if you have invested in monthly income fixed deposits, obtained monthly incentives or bonuses, indirect compensation, or have other static income sources. An additional income is always advantageous and significantly lowers your risk of loan rejection.
You may also want to know How to Get a Personal Loan in Easy Steps
A personal loan can help you with various needs, including paying for medical expenses, a wedding, a vacation, or purchasing consumer durables. Still, it's important to borrow only what you can afford to repay.
To ensure efficient processing, approval, and disbursement, all authentic documents must be submitted, and all information must be correctly filled out. We hope this blog will help you learn more about how to get your Personal Loans approved and how to avoid your Loan from being rejected.