11 MARCH, 2020
Personal loans are favoured by the borrowers due to their easy availability. Banks or other lending organizations readily approve personal loan applications. However, there are cases when the application for a personal loan has been rejected due to several reasons. If you are one of such people whose personal loan application has been rejected, then you can do the following things to get approval on your personal loan application in the next try.
Examining the Credit Report
When it comes to applying for any type of loan, your credit report is one of the most critical tools used by lending institutions. Therefore you must thoroughly examine your credit report while applying for a loan. Now, after rejection, you need to examine the inaccuracies (if any) present in your credit report. Make sure that your credit report is clean while applying for a personal loan.
Understanding the reason behind the rejection
When lenders reject a loan request, they are required to send an adverse action notice which enlists the reason(s) behind the rejection. This notice mainly consists of the reasons for rejection like unsatisfactory credit score, faults in credit history, etc. and the name of the institute that provided this information to the lender. So, when you receive such notice, evaluate it carefully in order to get your loan application approved in the next attempt.
Improving Credit Score
Clearing-off all old credit accounts
Any unpaid credit account reflects badly in your report. Therefore, clearing them on time is the best way to improve your credit score.
Being punctual while paying utility bills
Delayed payment reflects negatively in the credit report, and eventually reduce your credit score. So, you must not push your bill date while preparing to re-apply for a personal loan.
Avoiding full utilization of credit card limit
Maxing out your credit card is a sign that your income sources are not sufficient, thus this habit reflects negatively on your credit score.
Lastly, the loan inquiries you made in the past few months also affect negatively on your credit score. Therefore, if you are planning to apply for a personal loan, do not make other inquiries until you are fully prepared for it.
Signing up for credit monitoring
While working to improve your credit score, you must monitor your progress. For this, you can apply to get an annual free copy of your credit report from credit bureaus like CIBIL, Experian, etc.
In order to get your personal loan application approved after rejection, you need to gradually build your credit score and clear your credit report. If you be patient and adopt the above habits, it becomes much easier to avail a personal loan the next time you apply.
Everything you need to know about credit ratings
FAQs
In order to get your personal loan application approved after rejection, you need to gradually build your credit score and clear your credit report. If you be patient and adopt the above habits, it becomes much easier to avail a personal loan the next time you apply.
What to do if you keep getting rejected for loans? ›
Improve your next loan application
- Get a copy of your credit report. Check that your credit report has no mistakes and that all the debts listed are yours. ...
- Pay off some debts. Keep up with your loan repayments, and make extra repayments where you can. ...
- Consolidate your debt with a lower interest rate. ...
- Create a budget.
What should you do if a lender rejects your loan application? ›
You should request an explanation from your lender as to why your application was denied. The lender is required to provide you this explanation in writing if you request it, and must to give you copies of the credit score upon which the denial was based. Don't be discouraged. Another lender may approve you for a loan.
Why do my loan applications keep getting rejected? ›
It may be that your credit score isn't high enough. It could be your income and expenditure don't meet the lender's affordability criteria. You can ask to see your credit report to check it's correct. You can check your credit report for free.
How long to wait after loan rejection? ›
After being refused a loan, you should not reapply immediately. While there is no fixed amount of time you should wait, giving yourself at least 3 to 6 months before reapplying is essential to avoid harming your credit score.
How do you get a personal loan if you keep getting denied? ›
Some strategies for enhancing your loan eligibility include paying down existing debt, boosting your income or even applying again with a creditworthy co-borrower. Depending on your timeframe, you may also ways to improve your credit score by: Paying down debt balances.
How do you respond to a declined loan? ›
You could also consider contacting the lender directly to double-check their requirements.
- High debt-to-income ratio. ...
- Insufficient or unstable income. ...
- Basic requirements are not met. ...
- Review your decline notice. ...
- Review your credit report. ...
- Build your credit before applying again. ...
- Apply for a lower loan amount. ...
- Pay down debt.
Is it bad to get declined for a loan? ›
The Bottom Line. Getting denied for a loan or credit card will not be recorded on your credit report, and it will not directly impact your credit scores. To improve the chances that you'll be approved for credit, you may want to take a look at your credit before you apply, and take steps to improve it if you need to.
Does personal loan rejection affect credit score? ›
While the outcome of your application (approval/ rejection) is not recorded and has no direct bearing on your credit score, your credit report does have a list of recent loan enquiries along with details pertaining to your debts and repayment history.
How to get a loan when no one will approve you? ›
Getting a personal loan with a co-signer that has a strong credit score and a solid income can boost your application. Your co-signer – ideally, a family member or close friend – will apply alongside you, and you'll both be responsible for repayment of the loan.
If you get turned down for a loan or credit, the creditor must give you a notice explaining why. The Equal Credit Opportunity Act (ECOA) (15 U.S.C. § 1691 and following) and the federal Fair Housing Act (FHA) (42 U.S.C. § 3601 and following) are the primary federal laws prohibiting credit discrimination.
Which of these two should you do if your lender rejects your loan application? ›
Answer: Ask your lender why and Shop for a different lender or type of mortgage. Explanation: You need to know why in order to address the problem and by shopping for a different lender, you may find another one willing to help. Filing a dispute will serve no purpose.
How can I avoid rejection of personal loan application? ›
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.
Why was I rejected for a personal loan? ›
Although there are various reasons for getting denied when applying for a personal loan, five of those reasons include a low credit score, low income, a high debt-to-income ratio (DTI), an unstable work history, or an inability to meet basic requirements.
Why my application keeps getting rejected? ›
Any spelling errors or typos are an automatic rejection because later down the road it can cause you big consequences in your career. Before submitting, it is always best to double check or triple check your work and it is even better if you are able to have someone else look at it for you.
How soon can I reapply for a personal loan? ›
Each time you apply for a loan or credit product there is a hard inquiry that can temporarily lower your score. That's why it's a good idea to wait at least 30 days before you apply again. However, if you don't need the funds urgently, experts recommend waiting at least six months.
What happens if I can't pay my personal loan anymore? ›
After you fail to make a few payments, your loan will be considered in default, which essentially means that you've failed to follow through on the terms of your loan agreement. Once you're in default, you can be contacted by debt collectors and even be asked to appear in court.