Introduction
Personal loans are usually unsecured and this means they do not require any collateral hence they are easy to get, but are also subject to high stringency in eligibility. Applying for a personal loan may appear to be something straightforward while to most applicants they end up being turned down even when they meet the basic criteria. If you are looking for taking personal loan click on good at licensed money lender toa payoh. This article provides a general overview of the common reasons why money lenders reject personal loan applications.
Common Reasons for rejection of personal loan application
Low Credit Score
One of the most important things that lenders use in determining creditworthiness is the credit score. A low score usually means a history of late payments, defaults, high usage or no credit history at all. Most lenders usually will require a credit score threshold, which is between 650 and 750 to be used in approving personal loans. Scores that are below this range can make you qualify to be a high-risk borrower and have you rejected by the lenders.
Multiple Applications for Loans in a short period
Making multiple applications for loans to various lenders within a short time can be detrimental to your credit ratings. Every time you apply, lenders have to make a hard inquiry on your credit history. Hard inquiries that are too numerous can give an impression of desperation or bankruptcy. This is an alarm for lenders who may as well reject your application although you meet all their requirements.
Insufficient Income
Lenders must make sure that you have a stable and sufficient income to pay back the loan in time. In case your monthly salary is not impressive as compared to the EMI (Equated monthly installment) you’ll be expected to part with, your application may not be approved. There are lenders with strict income thresholds based on the level of money requested. Even if you earn enough to match the minimum requirements, if there is not enough that is left to spend after your current living expenses then your loan may not be approved.
High Debt-to-Income Ratio
The DTI ratio, another important indicator that lenders use for assessing your ability to repay the lenders, is yet another indicator that is considered. It is important to note that if the debt-to-income ratio is high, it indicates that an individual is already burdened with the repayment of existing debt.
Conclusion
It is correctly stated that applying for a personal loan is straightforward, but an individual should be aware of the common reasons like high debt-to-income ratio, insufficient income, and improper documentation to save them from the rejection of the personal loan application.
