Understanding Common Reasons for Rejection of Personal Loan Applications in India

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Personal loans are popular among people in India who need quick access to funds for various purposes, such as home renovations, medical emergencies, or debt consolidation. However, not all personal loan applications are approved by lenders. In fact, there are several common reasons why lenders reject personal loan applications in India.

Here are some of the most common reasons for personal loan application rejection in India:

  1. Poor Credit Score: In India, a credit score is an important factor that lenders consider when evaluating a personal loan application. A credit score is a three-digit number that reflects a borrower’s creditworthiness. If your credit score is low, lenders may consider you a high-risk borrower and reject your application. To increase your chances of approval, it’s important to maintain a good credit score by paying your bills on time and keeping your credit utilization low.
  2. High Debt-to-Income Ratio: Your debt-to-income (DTI) ratio is another factor that lenders consider when evaluating a personal loan application in India. This ratio measures your monthly debt payments against your monthly income. If your DTI ratio is too high, lenders may consider you a high-risk borrower and reject your application. To increase your chances of approval, it’s important to maintain a low DTI ratio by paying off debts and avoiding new debts.
  3. Incomplete or Inaccurate Application: In India, lenders require complete and accurate information to evaluate your personal loan application. If your application is incomplete or contains errors, lenders may reject your application. To increase your chances of approval, it’s important to carefully review your application before submitting it and provide any additional information or documentation that the lender requests.
  4. Insufficient Income: In India, lenders also consider your income when evaluating a personal loan application. If your income is too low, lenders may reject your application. To increase your chances of approval, it’s important to have a steady and sufficient income by increasing your income through a higher-paying job or side gig, or by providing additional income sources such as rental income or investments.
  5. Lack of Collateral: Personal loans in India are generally unsecured loans, which means they do not require collateral. However, some lenders may require collateral for larger loan amounts or for borrowers with poor credit. If you don’t have sufficient collateral, lenders may reject your application. To increase your chances of approval, it’s important to have sufficient collateral or to choose lenders that offer unsecured personal loans.
It's important to note that each lender may have its own criteria for evaluating personal loan applications, and the reasons for rejection may vary. However, by maintaining a good credit score, keeping your DTI ratio low, submitting a complete and accurate application, having a sufficient income, and having sufficient collateral, you can increase your chances of approval and secure the personal loan you need in India.
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An experienced, qualified and result oriented professional with several years experience as a Chartered Accountant. Hemant assignment in various industries have helped him to develop expertise in sales, customer relation management, and Enterprenurship. Hemant has got degree in B. Com ( Hons. ) from Delhi University and is a Chartered Accountant by profession.Specialties: Accountancy, Taxation, Corporate Law, Business Audit, Entrepreneurship.
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