A personal loan helps individuals fulfill their immediate financial needs as they don’t need to pledge collateral against the loan amount. But nobody wants to face rejection from a lender when applying for a personal loan. We will be talking about seven efficient ways by which you can avoid personal loan rejection from a lender. Let’s read this article further and know such ways.
Don’t Apply with a Low Credit Score
A credit score defines the creditworthiness of an individual. Each lender checks the credit score of individuals before approving their personal loan applications. So, if you have a low credit score (considered to be below 650), your personal loan application may get rejected. Before applying for a loan, you should check CIBIL score, eligibility criteria of the lender so that you don’t face rejection. You can also improve your credit score before you apply for a personal loan to avoid rejection.
Check Your Credit Report Regularly
Check your credit report at least once in three to six months before applying for a personal loan so that you can correct discrepancies (if any) on it. A correction can improve your credit score, and you will not face rejection from the lender.
Choose the Lender with Suitable Monthly Income Criteria
Every lender has definite criteria regarding the monthly income that changes from one city to another. So, if you don’t want to face rejection, you should see that you are applying at a lender that suits your monthly income. For example, if your monthly income is INR 20,000 and you’re applying for a loan that requires INR 40,000 monthly income, the rejection is obvious! That’s why you should choose a personal loan lender according to your monthly income.
Keep a Low Fixed Obligation to Income Ratio (FOIR)
Lenders assess the repayment capability of an individual with the help of FOIR, which could range from 40-50% ideally. If you have a lower FOIR, it means you have fewer existing obligations (loan or credit card EMI) that lead to a better repayment capacity. If you have a FOIR below 40%, you have higher chances of personal loan approval as compared to an individual who has this ratio above 50%. Also, low FOIR can help you get a higher loan amount due to the higher disposable income in your hand.
Avoid Frequent Job Changes
A lender would want to give a personal loan to a person who has a stable job and doesn’t change it frequently. If you have switched jobs frequently in the past, you have fewer chances of loan approval. Lenders generally require an individual to have an overall work experience of at least two to three years (of which a minimum of 12 months should be in the present company) before applying for a personal loan online.
Check Other Eligibility Conditions Carefully
Apart from the credit score and monthly income, you should also check the other important conditions like the minimum age and residence before applying for a personal loan online. You should check if a particular lender is offering a personal loan in the current residing city or not, to avoid potential rejection.
Submit Complete Documents
If you want to avoid rejection from the lender, you must fill the personal loan application form carefully and go through the documents that need to be submitted. Even if you miss a single document, it can lead to rejection from the lender.