What to Do When Your Bank Loan Application Is Rejected

Today a personal loan has become one of the most sought-after avenues of getting emergency funds, thanks to the convenience and flexibility it offers. You can apply for a personal loan from the best loan companies from the comfort of home. Thanks to a fully online application process, there’s no need for you to step out. A personal loan is also an unsecured form of borrowing, which means that you don’t have to arrange for any collateral against the loan. The documentation required is also minimal, and once your application is approved, you receive the funds instantly. You will directly receive it in your bank account within minutes.

But your loan application doesn't have to get approved the first time around. It may be rejected for many reasons, only you wouldn’t expect it. When your loan application is declined, you may not know what step to take next. However, there’s no reason to panic. You can go back to your lender and try and figure out why your loan was denied, and what you can do to prevent it from happening again. We’ve outlined those steps below:

1.     Find Out Why Your Loan Wasn’t Approved

This is, obviously, the first thing you need to do before you apply for a loan again. You deserve an explanation as to why your loan was denied, and your lender has to provide you with one. There’s no need for you to be in the dark about it. The most common reasons for banks rejecting a personal loan include having a bad credit history, a high debt-to-income ratio, or insufficient monthly income. If you’ve defaulted on past loans, then it will have impacted your credit score negatively. If you’re a first-time borrower, you have no credit score to speak of. In such a case, your lender cannot gauge your repayment capacity. A high DTI ratio is also a bad sign because it means that most of your income is taken up by existing debt. So, taking on extra debt is not a good idea. Sometimes, your monthly income isn’t enough for your particular loan provider.

2.    Fix Whatever You Can

Once you’ve understood why your loan application was rejected, then you need to work upon those factors by fixing whatever you can. You can start by examining your credit report. It is a comprehensive account of the loans you’ve taken in the past and your corresponding payment history. It also shows you who granted you those loans. Examine it carefully to understand why your loan was rejected – maybe there was a late payment? Or, you might also find errors in your credit reports (on the part of the credit bureau), which you can easily get fixed. When updated, your credit score may even improve.

3.    Improve Your Financial Standing

The points mentioned in the previous paragraph will all have a positive impact on your credit score. Once you’ve done everything you can to improve your financial standing, you are ready to go and apply again. However, it is also important to note here that a loan rejection just means that one lender doesn’t find you suitable enough. You can still try other alternative lenders that consider alternate data points (other than just your credit score) to underwrite their customers. KreditBee is one such new-age personal loan provider. They have different products to meet a range of financial needs as well. Their Flexi Personal Loan (up to ₹1 Lakh) is suitable for month-end cash emergencies or small yet important expenses. For larger, more significant expenses, you can opt for a Personal Loan for Salaried where you can avail loans up to ₹2 Lakhs.

In Conclusion

If your personal loan application gets rejected, there’s no need to panic or worry. You just need to take the above-mentioned measures to improve your creditworthiness. After doing so, you can re-apply for a personal loan. Some of them might be easy, such as rectifying errors in your credit report. Others, like building credit or increasing your income, will take time. Just remember that patience is key because the goal here is to improve your financial profile.

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