A personal loan rejection can feel like a serious setback, especially if you have big plans for that money like the home renovation or a down payment for your dream car.
Personal Loan Rejected? Here’s What to Do
There can be various reasons for your loan application getting disapproved. Here’s what you should do in case your application for a personal loan is rejected:
1. Find out the Reason for Rejection
Your personal loan can be rejected for multiple reasons. Generally, the lenders send you a letter citing the reason for rejecting your loan application. Some common reasons include:
- Insufficient income required to pay the loan
- Unsteady employment history
- Working at a delisted private company
- Eligibility criteria mismatch
2. Check Your Existing Debt
Lenders can determine whether you have too much debt with your debt-to-income (DTI) ratio. By your monthly income you can check this ratio by dividing your monthly debt payments. If your DTI ratio is 40% or greater, your application for a personal loan may be rejected. So, pay off your debts as soon as possible.
3. Check Your Credit Report
You need not pledge any collateral for a personal loan as it is unsecured. However, the lenders do need some surety that you are a worthy applicant and are capable of repaying the loan. For this, they check your credit report.
You are eligible for a free copy of your credit history once a year. So keep checking your credit report regularly for any discrepancies. Even a small mistake can affect your chances of loan approval. Look for credit accounts you didn’t open, unexpected charges or hard inquiries, etc. Such inspection will not only help you detect and protect yourself from fraud but will also ensure that your loan approval rate isn’t affected.
4. Consider Getting a Cosigner
If your loan application is rejected because your income and/or credit scores were insufficient, you still might be able to get a loan with a cosigner. A cosigner shares your responsibility for repaying the loan. You can ask a family member or a friend with a decent income and good credit to be a cosigner for your loan application. Ensure that your cosigner is aware of the fact that if both of you fail to repay the loan, the lender will come after both of you. Also, yours and the cosigner’s credit score will suffer.
5. Compare Lenders Online
Before reapplying, invest some time in researching lenders online. Every lender has different terms and personal loan interest rates. So compare rather than opting for the first lender you come across. This helps you find lenders who accept loan applications from borrowers with lower credit scores and offer interest rates that suit you the best. With online personal loan lenders, you can even pre-qualify online which enables you to preview terms and conditions. Consider online personal loan apps or websites for reapplying since their process and approval is quick, easy, and economical.
These tips can help you deal with the setback of a personal loan application rejection effectively and also equip you for preventing it from happening again.
HussaiN is a full-time professional blogger from India. He is passionate about content writing, Tech enthusiast & computer technologies. Apart from content writing on the internet, he likes reading various tech magazines and several other blogs on the internet.