Five reasons why your loan application can be rejected
Whether it is a medical emergency or any other financial emergency, bank loans can come in handy in times of need.
While applying for a bank loan is easy, the application process does not guarantee the approval of the loan. Banks can reject one’s loan application owing to a number of factors.
Here are some reasons why your loan application can be rejected.
1:Poor credit history and low credit score
Before approving loans, lenders take into consideration the applicant’s credit history; a poor credit repayment history can hamper one’s loan approval chances.
Maintaining a good credit score is also important to improve one’s chances to qualify for loans. The credit score represents the creditworthiness of an individual which is one of the major factors considered by lenders while approving or rejecting one’s loan application.
2:Multiple loan inquiries and rejections may lead to loan rejection
A loan application might also get rejected if, for any reason, their loan application has been rejected previously. This information remains with the credit agencies and the previous bank and affects the borrower’s credit history.
One should also limit their number of loan applications as too many loan inquiries could impact one’s credit score negatively, especially if applications are rejected.
3: Higher existing debts can also lead to rejection
Also, lenders can reject an individual’s loan application if their existing debts are on the higher side. If someone has high credit balances or debts, prospective lenders might consider that the borrower is already burdened with credit and may end up in default.
4 :Unsteady income and unstable employment history of the applicant
Most of the banks provide loans to individuals with a steady income and a good employment history.
If applicants do not have a stable job and have a history of switching jobs too often, banks are likely to reject their loan applications. Banks require the borrowers to have stable employment (or business), which means they will have a regular income.
5: Incorrect documentation or inconsistent information
Before approving an individual’s loan application, lenders verify all the submitted documents and the details the applicant has provided in their loan application. Incorrect documentation or inconsistency in the applicant’s information will lead to the rejection of the loan application by the lender.