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4 Things To Do If Your Personal Loan Gets Rejected

Published on Jan 21, 2021Updated on Jan 24, 2024

4 Things To Do If Your Personal Loan Gets Rejected

During the period ranging between 2015 and 2018, unsecured loans have witnessed a growth of approximately 4 times the bank’s credit. The increase in borrowings is fuelled due to a number of factors. While personal loans are easier to avail due to reasons that include faster approval and disbursement, collateral-free loans etc., not every application might be approved. So what can you do if your personal loan application gets rejected?

Here are 4 Things That Can Help you in Setting Things Right if your Application is Rejected:

1. Identify the Reasons Behind the Rejection

Identifying the root cause of the rejection can help in nipping the problem in the bud increasing the chances of your application being approved in the future. In addition to helping your loan is approved, it can help in improving your financial situation in the long run. Loan providers are required to notify the applicant about the reason for rejection. The various reasons that could lead to your application being rejected include:

  • Low credit score.
  • Inaccurate information provided to the lender.
  • Mistakes made in the application form 
  • Requested a higher loan amount that doesn’t match your eligibility
  • Failure to submit the documents required for the approval of the loan etc. 

Apart from these, some other reasons which are entirely dependent on the lender’s policy may also have acted against your favor. For instance:

  1. The lender may not have a branch in the city you reside in.
  2. The lender may not be currently providing loans to applicants receiving a cash salary.
  3. Some lenders also do not prefer lending to people who have less than 6 months of work experience at their current jobs
  4. Some lenders don’t prefer lending to applicants who may have switched jobs too often having spent less than a year at each
  5. Some lenders refrain from approving applications from candidates who have never taken a loan before and therefore have no credit history, etc.
Must Read: How to Avoid the Rejection of Your Personal Loan Application

2. Credit Score

The prime concern of every lender is that the money lent should be honored on time. The credit score is an important factor while evaluating a potential candidate’s eligibility for a loan. Lenders refer to the credit score computed by credit rating agencies to determine whether your application will be accepted or rejected. A credit score is a three-digit number that ranges between 300 to 900 and reflects the applicant's ability to repay the loan in the future. A good CIBIL score of 750 and above is considered excellent by most NBFCs and increases the chances of your loan being approved at competitive rates of interest. Banks may have a higher threshold for this particular criteria. 

If a low credit score is what led to your personal loan being rejected, this is what you can do to improve your CIBIL score:

  • Delaying your repayments can cause a setback to your credit score. Repay your pending bills on a war footing before re-applying for a personal loan. This includes credit card bills and student loans.
  • Avoid taking too many loans. Always ensure that your monthly EMIs together are less than 30%- 40% of your monthly income to get the best offers. More than 50%-60% indicate risky financial behavior and can affect your credit score adversely.
  • Verify your CIBIL report from time to time to rule out the possibility of errors. Rectifying errors or any delay in updating your credit report can help in improving your credit score. 

3. Submitting Inaccurate/Incomplete Documentation

Loan providers have simplified the process of borrowing which requires the borrowers to submit only the basic minimum documents required to verify their eligibility and process their application. The list of personal loan documents include:

  • A copy of the salary slips in case of salaried applicants and proof of income in case of self-employed individuals.
  • PAN card, govt. ID proof and valid address proof.
  • Bank statements for the past 6 months.
  • If your loan application is declined due to incomplete documentation, consider logging into the website to obtain a complete list of documents required for applying for a personal loan.
Must Read: How to Apply for a Personal Loan Online?

4. Frequent Job Changes

Loan providers evaluate your ability to service the installments on time. Frequent switching of jobs gives the lender the impression that you might not have the financial stability to repay loan installments on time and can lead to your loan application being rejected. The basic employment criteria to be able to apply for a personal loan is as follows:

  • The applicant must be an employee of a private or a public company with a basic minimum turnover as per the lender's policy.
  • The applicant should possess work experience of a minimum of 1 year and at least 6 months of work experience in the current company.

If your application is rejected due to frequent job changes, consider waiting for a period of a minimum of six months with your current employer while working on your credit score before reapplying.

Determine your eligibility using a personal loan eligibility calculator to help you plan your finances better and increase the chances of your application being approved. Happy borrowing!

* Please note that this article is for your knowledge only. Loans are disbursed at the sole discretion of SMFG India Credit. Final approval, loan terms, disbursal process, foreclosure charges and foreclosure process will be subject to SMFG India Credit's policy at the time of loan application. If you wish to know more about our products and services, please contact us

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