It's natural to feel disappointed or even anxious when your personal loan application is rejected. The feeling is even worse when you need a personal loan for an important purpose such as medical expenses, higher education fees, etc.
However, you must take comfort in the fact that loan applications get rejected all the time, for reasons such as bad CIBIL rating, poor credit history, etc. The good news is- you can turn things around by identifying the reasons behind your loan rejection and taking appropriate steps to ensure it doesn’t happen in your second attempt.
The following are some of the key points to consider after facing a loan rejection:
When was the last time you checked your CIBIL score? It's important that you review your CIBIL report at least once every few months.
Banks don't have to think twice before rejecting loans for bad credit . So, if your application is rejected as well, it's possible you have a bad credit score. Ideally, it should be higher than 750 (since 900 is the maximum) and if it’s anything below that, then you must take steps to improve it.
The following a few tips on how to improve your CIBIL score:
Debt translates to responsibility and financial burden. However, desperate times call for desperate measures, and people often apply for loans even when they already have a few loans to repay. If you already have a huge debt on your shoulders then it's possible that the bank has rejected your application on those grounds. Most lenders consider it risky to add more debt for someone who has enough on their plate already.
When the information given in your CIBIL report doesn't match with your other documents, then it can raise suspicions that ultimately lead to loan rejection.
The discrepancies in your CIBIL report could be either because of a software error or because of your bank sending incorrect information to the credit rating agencies. However, this problem can easily be solved by identifying these mistakes and having them corrected by CIBIL or any other concerned bureau.
Banks prefer loan applicants that have a long history of repaying loans, credit card bills, mortgages, etc. This is because the longer is the credit history, the easier it's to assess their credit repayment behaviour. So, if you have a short credit history or even worse- no history at all, then it can be a problem.
If you want to increase your chances of getting a personal loan then it will really help if you can create a good credit history. The easiest way to do that is to get a credit card and pay its bills in full every month. This way, in just a few months you can create a promising credit history.
Are you a salaried employee or a businessman? Do you switch jobs frequently or is your business recently established? These questions matter a lot as far as loan applications are concerned. Someone who jumps from one job to another frequently, or an individual who has ventured into the business domain recently are likely to have fluctuating incomes, and that raises a red flag for lenders.
Believe it or not, a bank can toss a loan application into the bin just because of an unconvincing or dubious purpose. Banks also don't usually sanction loans for reasons that are unethical. Since they often perform background checks it's better to be honest in your loan application.
Success and failure are both parts of life. So, if your loan application has been rejected, you don’t need to lose heart. Identify the reasons and then work on them. With a planned approach, you can easily secure a loan in your next attempt.