Over the past few years, there has been a sharp rise in the number of people applying for loans. Since so many people are applying for loans, the lenders too have become strict when it comes to disbursing a loan. There are a number of reasons why a personal loan gets rejected by the lender.
Here we are going to tell you about the four main reasons why lenders reject personal loans.
Poor Credit history
When it comes to sanctioning the loan, then your credit history and credit score are two important factors, which determine your credibility. If your credit score and credit history happen to be poor, then there is an extremely high possibility that your loan application will be rejected.
Your credit history tells about your past credits and how have you repaid them. In case there are any loan defaults, it will reflect in your credit history.
Based on what your credit history looks like, your credit score will be calculated and if it is a low score then your loan application will be rejected. If it is not rejected because of the low score then you will have to pay a high interest.
You might have the perfect credit history and credit score but there are still chances that your loan application might get rejected, one of the most common reasons can be that your income is insufficient to pay for EMIs on time. This is the classic situation of biting more than you can chew.
If there is a massive space between your income and your personal loan amount, then the bank will hesitate to sanction your loan amount.
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One the most frequent reasons why loans get rejected is because the borrower doesn’t have a proper documentation in place. There can be spelling mistakes, or not all sources of income are mentioned, there can also be a mismatch of data between what is provided and what is written. There are a number of reasons why irregular documentation can be the cause of loan rejection. One way to avoid this is to be careful and paying attention to detail.
Uninformed Guarantor to unpaid loans
You can be become a guarantor to someone else’s loans, without understanding the true implication of the deal. Make sure you are well-informed about the loan. Because if there is any kind of discrepancy in the loan or the repayment method, you will be held responsible equally and your credit history and credit score will suffer.
By signing the dotted line as a guarantor you also agree to the terms and condition of repaying the loan. This means that the burden of repaying the loan also falls on the guarantor.