When you apply for a personal loan, your lender checks for various aspects related to your finances. It helps them ensure that you have enough funds/income to repay the loan. You need to take care of all these aspects if you don’t want the lender to refuse your application.
Personal loans are essential for fulfilling your immediate financial requirements. Where this seems simple from your side, it may not be that straightforward from the lender’s perspective. As there are no backed assets in personal loans, they somehow need to ensure that you are capable of repaying. When you don’t fit into their personal loan eligibility criteria, your application gets rejected, and you don’t get funds. So, it is important to check it properly.
Here are the five tips that you can follow if you don’t want to face this rejection.
5 Tips to Avoid Rejection on a Personal Loan Application:
#1 Maintain Repayments
If you often miss payments of your EMIs or credit card bills, it creates an adverse impact on your credit score. Your personal loan application can quickly get rejected in such a scenario due to the low score. That is why experts recommend that you maintain a good credit score by repaying all the borrowed debt on time. Timely payments portray that you are sincere regarding your debts and finances. This will make the personal loan sanction process more convenient for you and your application won’t get rejected.
#2 Check For Personal Loans Online
This may surprise you that online and offline loan enquiries are treated differently by lenders. The online marketplaces aren’t only made for your convenience, but it also creates an impact on your credit score. Whether you are looking for a credit card or a personal loan, you should avoid directly contacting the lender. As in this case, the lender will initiate a request for your credit score. It can cut a few points from the score. When you go on the online portals for the same task, you yourself initiate the credit report request, which doesn’t affect your credit score. Therefore, the chances of getting a personal loan sanctioned are more on online platforms.
#3 Less Than 40% FOIR
FOIR stands for Fixed Obligations to Income Ratio. It is a contrast between your monthly income and the amount that you are obligated to pay for debts. A low FOIR means that you have a minimal obligated amount to pay in comparison to your income. If your FOIR is above 40%, it shows the lenders that you aren’t capable of repaying the loan premiums because you don’t have funds left after paying the obligated amounts. That is why you should try to maintain this ratio below 40% before applying for a personal loan. Only then your application won’t get rejected.
#4 Submit Proper Documentation
Several people face rejection of their personal loan application because they fail to submit the proper documentation. Along with checking for your personal loan eligibility, lenders ask you to provide them with a set of documents that prove everything that you have stated in your application. It can be both identity and financial information proofs. You should always provide them with proper documentation so that no issues arise during the process, and your application passes the tests.
#5 Don’t Opt For Multiple Loans
The lender will offer you a specific loan amount according to your financial situation. But it isn’t necessary that the amount will fulfil your requirements. In such cases, you may think to opt for multiple loans. Never do this as it can disturb your financial future. Plus, it can affect your credit score adversely. Even if you want more funds than provided, you should opt for a mix of secured and unsecured loans. This will give more comfort to the lender with some backed assets, and your application will get passed through easily.
These simple five tips will ensure that your loan application doesn’t get rejected and you get funds conveniently. Therefore, don’t waste your time anymore and look for personal loans online to find your most suitable option.