8 Common Personal Loan Rejection Reasons and How to Fix Them
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8 Common Personal Loan Rejection Reasons and How to Fix Them

8 Common Personal Loan Rejection Reasons and How to Fix Them

Turned down for a personal loan? That’s a serious blow – to your ego and to your cash situation. Obviously, you were in need of money for a big expense like a wedding, medical emergency or home renovation.

Now that your personal loan is rejected, you are at your wit’s end. But before you consider reapplying, it’s important that you understand the personal loan approval process and the possible personal loan rejection reasons. Your bank may tell you the reason, but that might not be the whole story. So, here are the possible reasons why your personal loan did not get approved:  

Personal Loan Rejection Reasons

  1. You are applying for too many loans or credit cards

Every time you apply for a personal loan or a credit card, the bank makes an inquiry for your credit report. This is registered as a hard inquiry with the credit bureau and gets added to your credit report.

When you apply for several loans at the same time, the banks perceive you as someone who is not able to manage money and is always on the lookout to borrow money.

How to fix it: Do your research properly. Compare your personal loan options in advance. Use an EMI calculator to know exactly what’s your monthly repayment amount is going to be and whether you can afford it. After you have made your decision, apply only for the loan that interests you.

  1. Your credit file is thin

Building good credit is crucial because personal loan approval depends upon how good your credit history is. If you don’t have enough credit experience, the banks may not have any clue about how disciplined you are with your repayments. That may get your personal loan application rejected.   

How to fix it: Before you apply for a personal loan, consider applying for a credit card first. However, you need to use your credit card responsibly. Maintain financial discipline and make timely repayments.

  1. You have a poor credit history

Your credit history helps the banks assess your eligibility for a personal loan and risk of default. If your credit history reflects a string of credit card defaults, it lowers your credit or CIBIL score and definitely acts against you.

How to fix it: Be aware of what’s recorded in your credit report. Check for its accuracy regularly. Try to repair the damage. Work towards building a good credit history.  

  1. Your existing debts are high

When banks review your loan application, they look at your debt-to-income ratio. If you owe a lot of money, your debt-to-income ratio may be high. That could one of the loan application rejection reasons.

If you are using 40% or 50% of your income to pay your debts, it’s a red flag to a personal loan lender. Your credit profile then becomes risky as lenders question your financial ability to manage a new loan obligation.

How to fix it: Knock down your debts before you apply for a personal loan.

  1. You do not meet the minimum annual income criteria

Often, banks have a minimum income requirement. If you have applied for a personal loan amount that is more than you are eligible for, the application is likely to get rejected.

How to fix it: Talk to your lender about minimum income requirement before filling the personal loan application form.

  1. Unstable history of employment

Most banks look for stable employment history in a candidate before approving the personal loan. You may be rejected even with a credit score of 800 and above, if you have a history of job-hopping, your application is likely to be rejected. If you are on probation, or in-between, it may be one of personal loan rejection reasons.

How to fix it: Stick to a job for as long as possible unless you have valid reasons to quit. That’s the lesson here and the fix too.

  1. You do not fall under the right age bracket

One of the personal loan application rejection reasons could be your age. Banks have age criteria. If you don’t meet it, your personal loan application is likely to get rejected.  

How to fix it: Check the eligibility criteria before applying for a personal loan. If you don’t meet the age criteria, don’t apply.

  1. There’s an error on your credit report

Your credit report may have errors that could easily prevent you from getting a personal loan. Credit reporting errors like payments reported incorrectly and closed accounts showing up as open are dangerous as they can reduce your credit score.

How to fix it: Check your credit report for errors. If you see something that’s incorrect, initiate a dispute with the credit bureau.

After you have identified the reasons for rejection of loan application, your next step is to fix them. Once they are fixed, you are all set to reapply.

Remember, if you want to get your personal loan application successfully approved, ensure that your debts are paid regularly and your financial profile is stable.

Want a personal loan from MoneyTap? Check the eligibility criteria and apply now.


India’s first app-based credit line, MoneyTap is a Bangalore based business that lends money with flexible interest rates, making credit quick and easy.

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