Things to Do if Your Personal Loan Application Gets Rejected | Personal Loan Stories - Kotak Mahindra Bank (2024)

FAQs

What to do if your personal loan is rejected? ›

In order to get your personal loan application approved after rejection, you need to gradually build your credit score and clear your credit report. If you be patient and adopt the above habits, it becomes much easier to avail a personal loan the next time you apply.

You should request an explanation from your lender as to why your application was denied. The lender is required to provide you this explanation in writing if you request it, and must to give you copies of the credit score upon which the denial was based. Don't be discouraged. Another lender may approve you for a loan.

It may be that your credit score isn't high enough. It could be your income and expenditure don't meet the lender's affordability criteria. You can ask to see your credit report to check it's correct. You can check your credit report for free.

After being refused a loan, you should not reapply immediately. While there is no fixed amount of time you should wait, giving yourself at least 3 to 6 months before reapplying is essential to avoid harming your credit score.

Some strategies for enhancing your loan eligibility include paying down existing debt, boosting your income or even applying again with a creditworthy co-borrower. Depending on your timeframe, you may also ways to improve your credit score by: Paying down debt balances.

The Bottom Line. Getting denied for a loan or credit card will not be recorded on your credit report, and it will not directly impact your credit scores. To improve the chances that you'll be approved for credit, you may want to take a look at your credit before you apply, and take steps to improve it if you need to.

While the outcome of your application (approval/ rejection) is not recorded and has no direct bearing on your credit score, your credit report does have a list of recent loan enquiries along with details pertaining to your debts and repayment history.

Getting a personal loan with a co-signer that has a strong credit score and a solid income can boost your application. Your co-signer – ideally, a family member or close friend – will apply alongside you, and you'll both be responsible for repayment of the loan.

Does a lender have to tell you why you were denied? ›

If you get turned down for a loan or credit, the creditor must give you a notice explaining why. The Equal Credit Opportunity Act (ECOA) (15 U.S.C. § 1691 and following) and the federal Fair Housing Act (FHA) (42 U.S.C. § 3601 and following) are the primary federal laws prohibiting credit discrimination.

Answer: Ask your lender why and Shop for a different lender or type of mortgage. Explanation: You need to know why in order to address the problem and by shopping for a different lender, you may find another one willing to help. Filing a dispute will serve no purpose.

Pay off your existing debts, including credit card bills, on time, before procuring a Personal Loan, as doing helps correct your low credit score. Apply for the loan jointly with another family member, preferably one with a higher income and CIBIL score. Avoid applying for multiple loans simultaneously.

Although there are various reasons for getting denied when applying for a personal loan, five of those reasons include a low credit score, low income, a high debt-to-income ratio (DTI), an unstable work history, or an inability to meet basic requirements.

Any spelling errors or typos are an automatic rejection because later down the road it can cause you big consequences in your career. Before submitting, it is always best to double check or triple check your work and it is even better if you are able to have someone else look at it for you.

Each time you apply for a loan or credit product there is a hard inquiry that can temporarily lower your score. That's why it's a good idea to wait at least 30 days before you apply again. However, if you don't need the funds urgently, experts recommend waiting at least six months.

After you fail to make a few payments, your loan will be considered in default, which essentially means that you've failed to follow through on the terms of your loan agreement. Once you're in default, you can be contacted by debt collectors and even be asked to appear in court.