Looking To Apply For Loans? Here's How To Prevent Application From Being Rejected

From maintaining credit history to opting for tenure in line with repayment capacity, here are ways to ensure that your loan proposal doesn't get rejected.

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There are times when you turn to loans for meeting your financial needs such as buying a home, running a business, fulfilling your child’s education dream or any other emergency. However, taking a loan can become a painful experience in absence of strong credit history.

It is also because the unsecured nature of loan forces lenders to carefully consider personal loan applications. There are ways to ensure that your loan application gets approved easily without much hassles.

Here’s how you can prevent the loan application from being rejected

Clean Credit history: It is because your credit score helps in determining the chances of loan approval. Usually, an individual with a credit score of 750 and above stands the best chance to get the loan approved. Hence, try to make sure that you make timely repayment of equated monthly installments (EMIs) and credit card bills, with a credit utilisation ratio within 30 per cent besides ensuring a healthy credit mix.

Opt for tenure in line with repayment capacity: It is prudent to keep in mind that repayment obligations including EMIs, should not surpass 50 per cent of the monthly income since lenders prefer applicants with that much capacity to repay. Besides, you should also count in the monthly contributions towards critical financial goals because not considering them can later force you to opt for costlier loans. It is always better to use EMI calculators to calculate the optimum loan tenure after factoring in the existing and new EMIs, unavoidable expenses, and monthly investments/contributions.

Always compare loan offers: Make sure that you always compare the loans before opting for any.  You may get personal loans from banks and NBFCs offering rates between 10-24 per cent p.a. It is always better to opt for a loan from an existing bank in which you already have an account. Also remember that along with rate of interest also compare other loan features including loan amount, processing fee, repayment tenure, prepayment charges, etc. before finalizing any lender. 

Restrain from frequent job switches: Also note another criteria lenders may consider while processing a loan proposal is your employment stability. Changing jobs too often may hamper the prospect because it is considered as a sign of career instability by some lenders. In such a case, lenders are likely to delay loans to such applicants. Therefore, try to avoid changing jobs too frequently as it may raise concerns at the time of availing a personal loan in the near future.