10 Most Significant Reasons Why Banks Might Reject Your Loan Application

Relying solely on your savings to cover sudden financial emergencies can not always be enough, we understand that you could need a financial loan to get through. We agree, that the last thing you would want in such a situation is for your loan application to be denied. Even though the majority of banks today advertise their loan-granting process as “hassle-free,” it’s sometimes not as simple as it seems. To be eligible for a bank loan, there are several requirements.

Here are some possible reasons why banks might be turning down your loan if you’ve been applying for one frequently. You can start working to change these conditions before requesting for a loan from the bank,

1. Maintain your yearly income and debt record

Maintaining a strong credit score is great, but lenders also take your yearly income and existing debt into account when you apply for a loan. This enables them to assess your ability to repay them for the sum you have requested. Your loan application may be denied if your yearly income is minimal and the lenders believe you won’t be able to repay the amount you are requesting. If you have any debts, you should pay them off to lessen the likelihood of this happening.

2. Maintain a good CIBIL score

Before granting you a loan, banks and lenders take into account a number of key variables, one of which is your CIBIL Score. The way you handle your credit has an impact on your credit score. It’s more probable that you’ll have a good credit score and be eligible for loans if you’ve kept up a good credit utilisation ratio and have a history of on-time payments. People who don’t do this, however, have worse credit scores, which causes their loan application to be declined.

3. Make sure the information you provide is complete and correct

Due to the fact that banks utilise these forms to assess your reputation, the information you provide on them has a significant impact on whether or not your loan is approved. When consumers fail to submit the necessary paperwork or don’t provide all the necessary information, loan applications are frequently refused. As a result, the loan application must be thoroughly completed and all required documents must be submitted.

4. Make sure there’s no error in your signature

For a fact, many people struggle to get a perfect signature, and by the standards, it should always be the same. It’s not simple to secure a loan these days, and if you sign your application incorrectly, it could be refused. If you don’t want your loan application to be rejected, you must make sure that your signature is flawless and matches the other paperwork.

5. Make sure you have a constant flow of income to prove your ability to repay

In order to determine if you will be able to repay the loan amount you have requested, the bank representative quickly checks your income history when you apply for a home loan. However, there is a potential that your house loan application will be denied if you have requested a loan amount that is well above your capacity to repay.

6. Focus on the utilization of funds,

It may surprise you to learn that most borrowers of personal loans spend the money for weddings, vacations, house improvements, or the purchase of new technology. The income security will be in conflict with your application for a personal loan if you want to utilise the money to launch your business. Always keep in mind that banks base their loan decisions on your current salary, not the expansion of your company.

7. Make sure the information that you provide to the lender is not false

If the information that you provide to your lender is fake and unverified, your loan application may also be instantly denied and turned down. Since every detail you submit is rigorously checked for legitimacy, if lenders discover a mistake, they will reject your loan application.

8. Make sure you have a residential stability

For the most part, the documents you submit for KYC take care of your residential stability by providing banks with evidence that you have a permanent address, which proves your presence in the city. If you rent your home, banks could ask you for further information, and if they can’t verify your residential stability, they’ll deny your loan application.

9. Make sure you have a stable employment

When it comes to giving you a loan, financial stability is highly regarded by all the financial institutions in the country. There is a percentage of good risk that your loan application will be denied instantly if you regularly change employment or if you’re engaged in unstable freelancing. So make sure that you have a stable source of income that doesn’t fluctuate in a course of every 4-5 months.

10. Make sure you have no pending loans

It is advised to only take out loans when absolutely required and to make sure that you pay your instalments on time because banks may still be able to access your financial profile even if you have taken out loans from third party banks. Your likelihood of obtaining the personal loan diminishes if you have numerous active obligations with banks and NBFCs.