Personal Loan Rejected? 6 Things You Must Do Next

The first question that comes to mind: Why was my personal loan application rejected and what should I do now? Should I apply to another bank right away? How can I improve my personal loan approval chances? Do I have other loan options? Well, this article will help you answer your questions. 

Coming to the first question, your personal loan application can be rejected due to a lower credit score, lower income, higher EMI/NMI ratio, ineligible occupation, etc. Further, if you have made multiple personal loan applications at once in search of the best offer can be your reason for loan rejection, as this leads to multiple hard inquiries which reduces your credit score. This also signifies financial stress and you may have difficulty in repayment.  

Prospective borrowers should first strengthen their loan application or explore and compare other personal loan offers before applying for a new loan. The ones who are in urgent need of funds can explore secured loan options, i.e., gold loan or loan against mutual funds. Here are 6 things that you should do if your personal loan is rejected:-

1. Check with your current bank/NBFC

Check with your bank or NBFCs with whom you have a deposit account or have availed a credit card, if you haven’t checked before making the personal loan application. Such banks and NBFCs usually offer personal loans to their existing customers at preferential rates. 

2. Visit Online Financial Marketplaces

Check for multiple personal loan offers on financial marketplaces such as Paisabazaar. Each lender has different eligibility criteria and lending policies. You can check for personal loan offers from NBFCs and reputed digital lenders, as they have relaxed eligibility criteria compared to banks. 

3. Review your credit report

Fetch your credit reports from the credit bureaus or online financial marketplaces. Check for–

• Inaccuracies or signs of fraudulent activity 
• Unpermitted credit card entries
• Errors in the report

Rectifying errors in your credit reports can improve your credit scores and thereby increase your chances of personal loan approval.

4. Improve your credit score

A lower credit score can be the reason behind your rejection of a personal loan application. Lenders prefer applicants with a credit score of 750 and above as financially disciplined and have lower chances of defaults. Improve your credit scores by following through healthy credit practices, such as:– 

• Repaying credit card bills and monthly instalments by their due date 
• Avoid applying for multiple personal loan applications within a short duration.
• Using a credit card for purchases and repaying by their due dates can gradually improve credit scores as transactions are reported to credit bureaus.  

5. Improve your personal loan application

• Stay for a minimum 6 months in your current organization. Consistent monthly income reduces credit risk for the lenders and thereby improves your loan approval. 
• Consider applying for lower loan amounts or higher tenures to improve your chances of approval. 
• Adding a co-applicant with a higher income reduces lending risk for the lender. 

6. Check for personal loan alternatives

If you not getting a personal loan due to a lower credit score, etc can apply for the secured loan options. Secured loan options include gold loan, loan against mutual funds, loan against your property, etc. The eligibility criteria of secured loans are not stringent compared to a personal loan, as collateral is involved which reduces the lending risk for the lenders.