What to Do if You are Denied a Personal Loan

Personal Loan


A personal loan helps individuals meet their emergency credit shortages quickly without the trouble of mortgaging their properties. Nevertheless, before approving the loan, lending institutions ensure applicants are creditworthy. If, for some reason, they deem that those applicants may fail to repay, they may reject the loan application. Alternatively, they may charge a higher personal loan interest rate to compensate for their risks.

You must know what you should do if you encounter the worst situation, i.e., getting a rejection on your loan requests.

Probable Reasons for Personal Loan Rejection

First of all, you must know the probable reasons for which individuals do not qualify for a personal loan. Here are some major reasons for which lenders may reject your loan requests:

  • High debt-to-income ratio 
  • Negative credit history
  • Incomplete loan application
  • Unstable and lower income
  • Not a settled employment

Things to Do After Getting Rejection on Personal Loan Requests

To increase your chances of getting a online personal loan in the future, you need to do the following things:

  • Know the reason for rejection

First and foremost, you need to ask your lender the reasons for disapproving your request for the loan. Lenders may disqualify you for many reasons, including negative credit history, low and unstable income, high debt-to-income ratio, etc. After knowing the reason, you can work on that issue, so that your next credit request is not rejected for the same reason.

  • Support monthly salary with additional earnings

Besides the credit score, lenders ensure you have sufficient monthly income to repay the debt conveniently. Nevertheless, your monthly salary may be lower than the required income standards. In this scenario, you need to inform the lending institution if you have any additional earnings from side hustles, including rent, dividends, interest, etc. It will improve your chances of being qualified for a personal loan easily. It can also enable you to negotiate with your lenders to set an attractive personal loan interest rate.

  • Try to improve your credit score

Lending institutions in India ensure applicants have a CIBIL score of at least 750 while approving a personal loan application. This is why you need to make a soft credit inquiry to know your existing credit score. If it is lower than the benchmark of 750, you must make efforts to improve it. 

Paying existing EMIs timely, reducing the credit utilisation ratio, and lowering the debt-to-credit ratio are some of the most important things you can do to enhance the credit score. You also need to know that negotiating for a lucrative personal loan interest rate also becomes much easier with a higher credit score.

  • Pay existing debts

Before applying for a personal loan next time, you should also ensure that your debt-to-income (DTI) ratio is lower than 36%. If the ratio is higher, you may face difficulties in repaying your current obligations. After repaying your current debts, the DTI ratio reduces, thereby enhancing your chances of getting a personal loan conveniently.

  • Compare lenders’ eligibility criteria before reapplying

You also need to check the eligibility standards of different lending institutions. This way, you can understand which lender lets you qualify for a personal loan comfortably.

In this regard, you can reapply for a personal loan from NBFCs since they come with relatively lower personal loan interest rate and lenient eligibility criteria. Moreover, you can easily get credit facilities from those financial institutions by applying online.

How to Apply for the Personal Loan Online

Here is a stepwise guide for applying for a online personal loan:

Step 1: Go to the official website of your preferred lending institution

Step 2: Find the personal loan application form 

Step 3: Fill in the application with personal, professional, and contact details

Step 4: Enter the OTP for authentication

Step 5: Enter the loan amount

Step 6: Submit your duly-filled application form

Upon completing these easy steps, you will submit your request for a personal loan.

When Should You Reapply for a Personal Loan After Rejection?

Multiple requests for a loan within a short interval reduce the credit score significantly. So, you need to wait for some days before applying again.

If the lending institution denies your credit request, you need an interval of at least 30 days before applying again. Nevertheless, it is better if you can wait for six months. This is because you can fix all your issues comfortably within this long interval.

In conclusion, lenders approve their personal loan only after confirming that borrowers will repay without failure. If you face rejection on your request for credit, you must question lenders to know the reasons for the same. You should work on those issues to get the credit facility next time without fail. In the meantime, you should also try to improve your monthly income and credit score so that it becomes easier to negotiate with the lender for a comparatively lower personal loan interest rate.

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