Why Your Loan Request May Be Turned Down

Being turned down for a personal loan is a serious blow, especially if you were banking on getting the cash. Understanding why your application was denied in the first place can help you out the next time you try to qualify for a loan.

When you apply for a loan, the bank judges your ability to repay the loan on various counts, including your age, income, job stability and primarily your credit report, which is a reflection of your true credit worth.

Here are some reasons why your loan request can be turned down, according to http://profit.ndtv.com.

Poor record of credit card or loan repayments: You have been accumulating credit card dues over the years resulting in a huge pending payment, well past the due date. When a bank looks up your credit card or loan repayment record, it will have a strong reason to reject your loan.

Too many previous loans and too little income:
 If you are juggling too many loans already, then your income minus the ongoing credit repayments is what will be considered as your real income. If another loan is likely to cause a severe strain on this income or make it unlikely for you to be able to repay effectively, then your loan will be rejected.

Loan guarantor to someone who didn’t pay up:
When you sign the dotted line to be someone’s loan guarantor, do exercise a lot of caution. You must make sure the applicant you are vouching for has the ability to repay the loan without hassles. Unless and until you have strong reasons to believe so, do not rush to sign for them because if they fail to repay for any reason, you will be accountable to repay the loan on their behalf.

You are a compulsive job hopper:
Banks place a lot of importance on job stability and certain banks even insist that an applicant needs to be employed with a particular concern for a certain period to be eligible for a loan. Also, in instances where a reputed company’s future appears unstable, the bank can reserve its right to provide a loan to the applicant from that company.

You want a joint loan with your sister or friend:
Though some banks might consider providing a joint loan to brothers who are co-applicants, banks, as a rule, do not provide loans to sisters or a brother and sister or friends, who wish to be co-applicants. However, you can opt for your parents as co-applicants for the loan.

Your loan application has been rejected before:
Remember, it is not a wise thing to keep applying for a loan without any reason. If your loan application gets rejected, this is also recorded in your record. So weigh the pros and cons before you apply for a loan simultaneously to different banks. Wait till you receive an offer before you apply to another bank. This will give you a chance to rectify errors or update your credit record in case there is an issue with it before you approach another lender.

August 15, 2016