9 Common Reasons for your Private Loan Rejection
Getting a private loan is a challenging task, and if you are in the market trying to get one, then you might have put in a lot of research to find a private loan lender that gives you the best deal. Private loans are an excellent way for many people to finance their education, home improvements or other large purchases. However, sometimes you may be rejected for a private loan even though all the information on your credit report is fine. If this happens to you or someone you know, here are the top 9 common reasons why a private loan can be denied.
1. You Forgot to take the NOC from the Previous Lender
When you apply for a private loan, the lender will require a NOC (No Objection Certificate) from your previous lender. The NOC is a document that shows that you have no objections against the loan. If you are applying for a new loan and don’t have a NOC, you must take it from your previous lender because there’s a chance that your loan application might get rejected if your credit report doesn’t mention NOC.
2. Residential Stability
Residence is the most important factor that a lender looks for when deciding whether to approve or deny a loan. If you have a stable residence, your chances of getting approved for a private loan are high. If you are living on rent, then you may be required to submit some additional details.
A loan application will be rejected if it is judged that there is a high risk that the applicant will not continue living at the same address or move out of their current home before they have repaid their loan.
3. Bank’s Defaulter List of Location
Every bank maintains a list of locations that fall under a negative zone or have a long list of defaulters. While this may sound weird to you, there is a high chance that the bank may reject your loan application if you are living under one of these zones.
4. Multiple Loan Enquiries and Applications
Another reason why your private loan application might be rejected is that you have multiple loan enquiries and applications with different lenders.
If a lender knows that you have applied for multiple loans, they will think that you are a credit-hungry person who cannot afford to pay back the money. They will also assume you will default on all these loans, making them wary of giving out any future funding.
5. Too Many Existing Debts
The bank will look at your current credit history and see if you are already in debt. They will also look at your income and the amount of money that you make each month. They will reject your loan application if these numbers do not meet their requirements.
They might also decide that there are too many red flags with regard to your credit history and background. If you have defaulted on any loans or late payments in the past, it can be difficult for lenders to trust you with more money.
If you have a lot of existing debts, it might be better to consolidate your loans with a consolidation loan or pay off your old debts first before taking out a new loan.
6. Unstable Employment History
Your employment history is one of the most important parts of your application. A stable employment history is necessary for many lenders and will help them determine whether or not you are a good risk for a loan.
Your previous employers may be able to provide evidence that you have been fired or that you have been laid off. If this has happened, it may be hard for lenders to believe that you can keep up with payments on your loan if you were let go from a job for any reason.
7. Income Criteria Not Met
Lenders want to be sure they’ll get their money back. To ensure timely repayment of the loan, they check your income. If you have a steady income (enough to cover all your monthly payments on time) and stable sources of income, you’re more likely to pay back your loan on time. If your application shows that you don’t have enough money for your monthly payments or if you can’t afford to make regular payments every month, then lenders may reject your application for a private loan.
8. Missing or Incorrect Documents
Missing or incorrect documents are the most common reason for your private loan rejection. If you don’t have all the right documents, your lender may not be able to process your application.
Missing documents may include proof of residence, proof of income, and other pertinent information. You should also ensure that all your information is correct and up-to-date.
If you do not have all the required documents, it will be difficult for a lender to approve your loan application, especially if you are applying for a large sum of money.
9. CIBIL Score
Having a good CIBIL score is important for your loan approval; however, many lenders can still offer you a private loan while you build up your credit history. Therefore make sure that you research before applying for a private loan from a specific lender because it can play a major role in your loan approval process.
When applying for a private loan, there are a number of factors that can be evaluated. It is important to be familiar with the reasons for which an application can be rejected, and we hope that this blog has helped you with the same.