Top 5 reasons why a personal loan application may be rejected

Personal loan is the best way to finance immediate requirement for cash. Let's discuss how easy or difficult is it to get your personal loan application sanctioned. Here are the top 5 reasons why most personal loan applications get rejected. 

1.    Salary payment by cash: The way you get your salary is important. If you are earning well but getting salary through cash or cheque then banks may not give you personal loan. Bank prefer customers who receive salary directly in their bank account by direct transfer or ECS.

2.    Work experience of less than 3 years: Work experience plays an important role in obtaining a loan sanction. Most banks require minimum of 3 years experience to establish job stability. Some banks may also insist upon minimum one year stability in current job. Having sufficient experience but frequently switching jobs may also lead to rejection of your loan application.

3.    Residing in negative area: Your residence locality also matters when you  apply for a personal loan. Most banks have a "negative area list" and they don’t provide loans to resident of these areas. So it is good to check the same with the banker before handing over your document to them.

4.    Poor credit history and low CIBIL score: Bank always verifies your credit history before lending you any amount. If you have skipped EMI’s and haven’t paid your credit card bill on time, this all will affect your credit history and hurt your CIBIL score. The bank will reject your application in case of bad credit history. Check your approximate credit score estimate here

5.    Invalid Details: Bank verifies every detail provided on your application. If any detail is incorrect or if you are not reachable for verification, then your application is likely to be rejected. 

6 Smart Tips to Get Lowest Interest Rates on Personal Loan

Planning to go on a enjoy-now pay-later vacation? Here are some tips to get personal loan on lowest interest rates.

1 Check your CIBIL Score: Your CIBIL score is used by banks to check your previous loan repayment record. In case your CIBIL score is above 750, you are likely to get personal loans at lowest interest rates.

   

Check Seasonal Offers: Banks often offer special rates of interest on personal loan for limited periods. So always compare latest interest rates and schemes of multiple banks before applying for the loan. Remember that your salary bank may not always give you the best offer. Like phones, shoes and apparels, best offers are typically available online at Lowest Personal Loan Interest Rates in India

How about a gold loan instead? – Interest rates on gold loan range from 10-13% vs. 12-16% on personal loans. So, you may like to check the lowest rate available on personal loan with those on gold loan.

Hidden Charges: Some loan offers may look cheap with their low headline interest rates but come with hidden charges like processing fees, administrative fee, mandatory insurance premium and the likes. So, always check the overall costs before deciding on the loan. Many a times, these are not disclosed to the customer at the time of application. So, please check these upfront before applying for your loan.

 Prefer banks over NBFCs: Banks and NBFCs both may give same offers on loan but when you compare it in totality, most banks offer better deals on personal loans.

 Check Interest Calculation Method: Sometimes, Loans with low interest rates may be costlier than the higher rate of interest loans. It all depends on the way interest is calculated. So, don’t get carried away by such offers without understanding the details.

A flat rate would cost you more than reducing rate. In flat rate, you pay interest for the initial loan amount till end of loan tenure whereas in reducing rate, you pay interest only on the outstanding balance.