Personal Loans are incredibly easy to procure, with most banks approving and disbursing funds within hours. In addition, lenders are not concerned about how you utilise the funds from the loan in that there are no end-use restrictions. While it is quite rare, banks may sometimes reject your Personal Loan request. So let’s assess the common reasons why lenders may reject your Personal Loan requests.
- Low Income
The most common reason a lender may reject your Personal Loan application is low income. If your income is less than the minimum income requirement set by the lender, the lender may reject your loan request. For instance, most lenders require that your net monthly income should exceed ₹25,000. Now, if your monthly income is below ₹25,000, lenders may not sanction your loan. - Low Credit Score
Irrespective of which loan you apply for, lenders ask you to provide your CIBIL or credit score. A credit score is a 3-digit score that allows lenders to assess your credit repayment behaviour. Typically, you need a score of 650+ to be considered for a loan, whereas a score of 750+ out of a possible 900 points is deemed excellent. A low CIBIL score jeopardises your chances of availing the loan. Conversely, a high CIBIL score can help you obtain the loan rapidly, with room to negotiate a considerably lower interest rate.
Low credit score? Read more here on how you can improve it! - Job Instability
Lenders need to ensure that you have a stable source of income that allows you to repay the loan instalments. As such, job instability can also be a significant hurdle in the loan procuring process. People who switch jobs regularly, or those who are unemployed for extended periods, may not be able to procure loans easily. On the other hand, if you are employed with an organisation for more than 1-2 years, your chances of getting the loan approved can increase significantly. - High debt to income ratio
Yet another common reason why many applicants' Personal Loan applications are rejected is a high debt to income ratio. For instance, if your monthly income is ₹25,000 and your monthly EMIs stand at ₹15,000, it means that the remaining ₹10,000 may not be sufficient for you to manage your other monthly expenses. This is a red flag for lenders since it raises suspicions about your chances of defaulting on loan EMIs in future. Also, if you have existing debt and are taking on a new loan, it makes lenders question your repayment capacity, leading them to reject your loan application. - Tips to boost Personal Loan Eligibility
Do not let your low CIBIL score or job instability be a deterrent in the loan procurement process. You can, instead, follow these tips to boost your Personal Loan eligibility. - Show your additional income sources – variable pay, quarterly incentives, income from other sources, etc, as part of your income proof to combat low income and enhance your eligibility.
- Pay off your existing debts, including credit card bills, on time, before procuring a Personal Loan, as doing helps correct your low credit score.
- Apply for the loan jointly with another family member, preferably one with a higher income and CIBIL score.
- Avoid applying for multiple loans simultaneously.
- Choose a lender with simple eligibility criteria which fit your requirements.
Apply for a Personal Loan with HDFC Bank
At HDFC Bank, we offer collateral-free and high-value Personal Loans at competitive interest rates. Get loans of up to ₹40 lakh with paperless documentation and repay the loan comfortably in tenures lasting up to 5 years.
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*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Personal Loan at the sole discretion of HDFC Bank limited. Loan disbursal is subject to documentation and verification as per Banks requirement.