When you apply for a loan from a bank or NBFC, they try to judge your ability to repay the loan. This judgment depends on various factors, deciding your creditworthiness. Some of those factors include borrower’s age, income, career stability, and credit history for sure. Before opting a loan you should calculate your Loan EMI. Doing this will help you to plan and choose your lender.
Lenders have set their own eligibility criteria to approve a loan application regarding these factors. In case they find any applicant not eligible in any of these respect, it results in the rejection of the loan application.
Reasons Why Your Loan Request Can be Turned Down
Lenders are hesitant to grant a loan to borrowers who already have too many loans. Granting a loan to such an applicant increases the individual credit debt and can also lead to defaults. Hence, it becomes risky to lend to such an applicant.
Frequent borrowing can also affect your CIBIL Score. Even if are repaying your loans in the schedule way and timely EMI, lenders may think that he/she will not be able to repay the loan due to their credit dependency. In such a case, where the application is financially overburdened, the lenders conclude it as a risky profile and reject the loan application.
Co-applicant has a Poor CIBIL Record
It is very important for every loan applicant to have a good credit score. Yet, your loan application may get rejected for unforeseen reasons. And, the CIBIL Score of the co-applicant can be one such reason.
So, even if you have a very good credit record and your co-applicant doesn’t have it may be the reason for the rejection of loan your loan application.
You are a Frequent Job Hopper
Your job stability plays an important role when you apply for a loan application. Job stability gives a relief to the lender regarding the repayment.
Lenders try to lend to applicants who are employed with a particular employer for a minimum of two years. If you don’t have a stable job the lender cannot be sure about the repayment, hence they may react your loan application.
Your Loan Application has been Rejected Previously
One should not apply for loan frequently when it gets rejected from one or You want a joint loan with your sister or friends: though some banks might consider providing a joint loan to brothers who are co-applicants, banks, as a rule, do not provide loans to sisters or a brother and sister or friends, who wish to be co-applicants.
However, you can choose to opt for your parents as co-applicants for the loan. Loan rejections are also recorded by CIBIL. So once your loan application gets rejected, got start applying with other lenders. Try to know the reason behind the rejection and start working on that to improve. Rectify errors in your CIBIL or update your credit record in case there is an issue in.
You Applied for a Loan with Your Friend or Sister as Co-applicant
Though getting a joint loan is possible, but some of the banks might not consider providing a loan to a joint loan to brothers, sister or a friend as a co-applicant.
Few banks have a strict policy not provide loans to sisters, brother or friends when they apply as a co-applicant. However, you can be approved for a loan, when you choose to apply with your parents or spouse as co-applicants for the loan.
Irregular Tax Paying History
Lenders prefer to lend to applicants who have filed their income tax returns regularly in the past. To get sure lenders to check for the past two or three IT – return documents of the applicants. If an applicant has not paid regular taxes in the last few years, the loan application of such applicant’s may get rejected.
Guarantor to a Defaulted Loan
If any loan defaults, it impacts the CIBIL of both the borrower and the guarantor as well. Hence, even if you are not a direct borrow and a part of it as a guarantor and it defaults, it will affect your CIBIL as well. In a situation like this, you apply for a loan, due to Low CIBIL it may get a rejection.
Hence, it becomes more important to ensure the repayment capability of the borrower before becoming a guarantor to his/her loan.