Top 6 reasons why your Personal Loan can be rejected

personal loans are considered to be the most popular options for meeting urgent financial needs. From medical emergencies to debt consideration, a personal loan can be availed for any personal financial requirements as the product puts no restriction on its end use. With the facility of instant approval, affordable rates and online availability, personal loans have become an easily accessible credit options too. However, considering the fact that personal loans are unsecured in nature, the risk lies more on the lender. Hence, personal loan processing is more stringent. There are instances where personal applications could be turned down for many reasons.

Here are some most common reasons for personal loan rejection

Poor credit score

Credit score is the main consideration when it comes to evaluating your personal loan application. As there are no collaterals required for the personal loan, lending will be based on financial behaviour or repayment capacity of the borrower. Hence, better the credit score more is the chances of getting a personal loan approved.

Credit score depends on your timely payment of credit card dues and other loan EMIs, utilising the credits properly and maintaining a good mix of credit. Poor credit score or CIBIL score puts the borrower in danger of facing rejections. However, if all the other criteria’s are met a ‘fair’ credit score may also be considered for providing a personal loan.

Insufficient income

While evaluating the risk, income plays a major role as the repayment capacity is assessed by this. In case the income level is inadequate to pay the monthly instalments, then chances of getting the personal loan approved are very less. Usually, the income requirement is clearly specified in the eligibility criteria of personal loan. If the income level meets the criteria, then only a loan application will be considered.

Too many applications/prior rejections

Every loan application submitted and rejections by lenders get recorded in CIBIL records/reports. As soon as borrower applies for the loan, the lender takes a credit report from CIBIL or credit bureau for assessing the risk. Every such enquiry, applications and previous rejection of loans would turn unfavourable to a borrower. In certain case, being a loan guarantor for defaulted loans could also affect credit report badly and become a reason for personal loan rejection.

Too much of debt

Too many open loan account would seem like a bad management of debt. Usually, even if the credit score is good, having too much debt obligation in consideration to disposable income would adversely affect personal loan application. Banks may turn down the personal loan application if the debt income ratio is not impressive.

Unstable employment

Constant job switching could be one of the reason for personal loan rejection. Stable employment is a biggest consideration by the lenders when it comes to offering unsecured loans. Job stability is nothing but income stability that gives a good impression that the borrower would not default. To be in the same employment for one year/two year has now become an eligibility requirement by many lenders. Not meeting the eligibility requirement increases the chances of rejection.

Incomplete documentation

Submitting incomplete documents can lead to personal loan rejection. Eligibility criteria is proved with the help of these documents. Also, making mistakes in filling up the personal loan application form can result in rejections if the documents do not match with the application. Hence it is important to adhere to the documentation requirements. With the digital availability of personal loans, providing incorrect information and tampering of documents can ultimately lead to Out-right rejection of personal loan.


To sum up, not having a good credit score, not meeting the required eligibility criteria, poor track record, and incomplete documents and having too many debt obligations would result in rejection of personal loan. Keep these things in mind and try to build a good credit score, be on time for all payments and follow the criteria and requirement to reduce the chances of personal loan rejection. With cautions and good financial behaviour, rejections can be avoided. Maintain a clean credit history and avail debt only to an affordable extent