CIBIL score essentially informs lenders as to whether or not you are likely to miss loan instalments. Anything with a score of at least 750 and higher is likely to work in your favour. A score of at least 700 is deemed acceptable (considering a range of 300-900).

You carefully consider all the details and establish the loan amount you require. You come to the conclusion that all the money you want is just a quick loan approval away, so you confidently march your loan application and extremely respectable CIBIL score into the bank and submit them for review.

10 Loan Rejection Reasons

1. Income and Debt

While it’s great to keep your credit score high, lenders also take your yearly income and existing debt into account when approving a loan application. This enables them to assess your ability to repay the sum you want from them. There is a potential that your loan application may be denied if your yearly income is low and the lenders believe you won’t be able to repay the requested amount. Pay off your debts if you have any to lessen the likelihood of this happening.

2. Remarks in CIBIL Reports

CIBIL reports include a numerical score as well as opinions and feedback from lenders. In order to assist you in paying off your debt, banks will occasionally provide you the opportunity to settle your loan for a sum that is somewhat less than the sum of all of your EMIs. They may also offer interest rate reductions or other debt relief options. There will be a note about it in your CIBIL report, which will act against you, if you pay off your loan in any way other than how you agreed to when you accepted the loan. Banks interpret any references to loans being “written off” or “settled” or payments made after the due date (“DPD” = Days Past Due) as red flags and will deny your loan.

3. No reliable Source of Income

Being a salaried worker is one of the prerequisites for the personal loan application. The personal loan application will reject your loan request if you don’t have a steady source of income. Avoid asking for a fast loan if you are unemployed or between jobs. If you have a second source of income, such as rental income or investments with monthly returns, that might be helpful. Additionally, the business you work for should be registered. You must have worked for the same company for the previous three to six months in order to submit your pay stub.

4. High Credit Utilization

It is termed excessive credit utilisation if you use your credit card to make purchases that are greater than 30% of the entire credit limit. Loan approval rates are higher for applicants with credit utilisation rates under 30%. One of the factors that might cause your loan application to be denied is having a high credit usage rate. In order to maintain a high credit score and reduce your debt load, it is best to keep your credit utilisation rate below the specified percentage.

5. If you are Overleveraged 

You can only assign a certain amount of your declared income to clearing debts. If you earn Rs.50,000 per month, and have three other loans you’re clearing by paying Rs. 10,000 per month, each, you’re left with Rs. 20,000 for survival and personal expenditure. Banks will not approve another loan and will deem you overleveraged. Your DTI (debt-to-income) ratio will be unfavourable and you will not be able to allocate more of your income to clearing off your new loan.

6. Lack of Documents

Consider applying for a loan at a bank. You would wait in long lines and over lunch breaks, walk from counter to counter, and then submit your application with the required paperwork. A few days later, when you assumed your loan must have been authorised, the bank notifies you that your loan has been denied owing to inadequate documentation. Do you already feel frustrated?

The most frequent reason for loan denial is incomplete documentation. When you need money, they add to your issues by causing needless delays and denials. Even if you apply for an immediate cash loan online, where there is less paperwork, your loan application will be denied if necessary information, such as IDs and pay stubs, is absent.

7. Inconsistency in Signature

Many individuals struggle with getting a flawless signature, and by the standards, it ought to be the same everywhere. Now, getting a loan isn’t that simple, and when you sign a loan application incorrectly, it gets refused. If you want your loan application to be approved, you must endeavour to produce the perfect signature that matches your other paperwork.

8. Standing Guarantor on A Defaulted Loan 

A guarantor is seen as being just as liable for loan repayment as the borrower (even if not quite literally). Your CIBIL score and report will suffer if you served as a guarantor for a loan that has fallen into default

9. Several Hard Inquiries

Although it is natural to feel hopeless when you need money right away, applying to several lenders will just reduce your chances of getting a quick cash loan. Lenders run a hard credit check, and having a lot of hard inquiries in a short amount of time can really affect your credit.

10. Secured-To-Unsecured Loan Ratio

Home loans, vehicle loans, and other types of secured loans require collateral such as assets or a guarantor, whereas unsecured loans do not (personal loans, credit cards, etc.). Having more secured loans than unsecured loans would be a favourable ratio.

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