Personal loans are unsecured loans that can be availed without any collateral and for any undefined reason. It takes minimal documentation and very few days or hours processing time to avail a personal loan. Any person who has a good credit score and is employed can avail a personal loan. However, it is not always as easy as it sounds. You might get rejected for the same despite possessing a good credit score.
An instant personal loan is easy to avail of compared to other loans, but it is not a cakewalk! You might apply for instant personal loans online and relax thinking that your good credit score will get you the loan, but it is not always the case. When a person applies for a personal loan, a lot of factors like employment history, monthly income, previous and current debt records, etc., are evaluated by the bank before approving the loan application.
A personal loan application can get rejected by a bank due to a number of reasons that are also taken into consideration along with the credit score of the applicant.
6 Key Factors That Affect An Instant Personal Loan Application:
There are several factors apart from credit score that affects an instant personal loan application and can be a reason for its rejection. The 6 key reasons are as follow:
- Your Employment History and current status:
If your employment history reflects that you frequently keep changing your workplace and you are not consistent with your job, banks may not find you reliable enough to provide a personal loan. Also, if you have recently associated yourself with the company you are working in, your loan application is more likely to get rejected. Banks usually prefer to provide a personal loan to an applicant who is at least a year old in his company.
- Previous and current debt records:
Your previous debt records are evaluated to find out the types of loan you have previously availed and if you have failed to pay any EMI of your loan or not. Also, if you are already under a lot of debts including credit card bills or other forms of loans then your loan application might get rejected. Banks do not prefer providing instant personal loans to any individual who is already under debts.
- Your Monthly Income:
If your monthly income is lower than the eligibility criteria of a bank, your loan will not be approved. Since personal loans are unsecured loans, the income of a borrower is assessed to decide whether credit should be provided or not. Therefore, you must have a consistent decent income to get the approval of an instant personal loan.
- Your name was on a defaulters’ list:
If a person had failed to pay any of his EMIs in the past or did not clear his credit card dues within the due date, his name would appear in the defaulter’s list of the bank which is circulated in the record files of every bank. In such a case, your instant personal loan application might not get approval even if your present credit score is good.
- A lot of due loan applications:
A bank cross-verifies your debt records and your relations with other banks. If it is found that you have applied for various loans in a short period of time or you have due credit card applications, the lender may feel reluctant in approving your loan application. Due loan applications show that a person is struggling to acquire a loan facility from banks. In such circumstances, a bank may not be assured of his ability to repay the loan.
- No updation in your credit report:
There are cases where a person has closed his credit card accounts and settled his loans before time. In such cases, his credit report would not be updated. So, when he applies for a personal loan, and it is seen that his credit report has no recent update, banks can reject his personal loan application on the basis of existing credit rating. A well-maintained and up-to-date credit report are very important to avail of an instant personal loan. Credit reports reflect a person’s ability to pay and his responsibility towards the repayment process of the loan. Therefore, if it is not properly updated, one may not be able to avail a personal loan.
Banks depend largely upon credit reports, monthly income and employment records of a person along with his credit score when it comes to extending personal loans. A credit score is not the only factor of assessment and therefore, it is not enough to get the approval. One must maintain and qualify all the factors in order to be eligible for an instant personal loan. After all, reputed goodwill in the money market is very important to avail a personal loan. Hence, it is advised that one should make sure that he is eligible for all aspects before submitting an instant personal loan application to any lender.