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5 Common Reasons for Your Personal Loan Rejection. How Can You Avoid It?

A personal loan or any loan for that matter is mostly taken when there is a need or an emergency, and having rejection on it could be irritating. Suppose you are having some urgent medical emergency or you have to make a payment for your child’s education, and you applied for a personal loan with all the hopes that you will have the money shortly. At this point, you will definitely try to avoid personal loan rejection.

But unfortunately, your loan application is rejected. Alas! What to do now? How to arrange money? What if the admission date is over? How do I make the payments at the hospital? How to grab a good opportunity with no money? Whom to ask for money? And whatnot?

There are so many such questions that can start popping into your mind, making you lose your confidence. So, let us know the top reasons for personal loan rejection.

What are the 5 Reasons Why Your Personal Loan Gets Rejected?

1. Not meeting the eligibility criteria: A loan application begins with checking the eligibility. Whether you don’t meet the age criteria or your income does not meet the lender’s standard or you have applied for a sum that you are not eligible for.

These reasons could lead to your personal loan rejection. Residential status, citizenship, and employment status are also a few points that can be looked at by the lender.

2. Improper documents: Your documents are very important to get approval for a loan. They act as the proof of everything that you are or have as an applicant for the personal loan. Not having them in the proper condition or if you miss submitting any of the documents can be the reason for your personal loan rejection.

3. Low CIBIL score: CIBIL score is something that almost every lender checks before approving your loan. Past loans, their repayments, the number of loans you have now, income vs. liabilities, etc. are a few pointers that conjoin to making a credit score. Having a poor credit score is one of the biggest reasons behind the rejection of your personal loan application.

4. Pending loans: Having loans means having liabilities. Having pending loans means high chances of bad debt. To save from any loss, the lenders check this point, and there are chances that your personal loan application could be rejected at this point. Irrespective of the lender, it counts, and if there are multiple running loans, the chances of rejection go even higher.

5. Income instability: Having a job or a source of income is one thing that leads to knowing your payback capacity. But, not sticking to one job or business for a decent period can be the reason for the rejection of your personal loan application.

Also, in one year or in past years, inconsistency in your income could add to the failure of the approval of your loan. This is because it shows that you are not serious on the grounds of finances, and the lenders don’t see such applicants as potential customers.

To save from any such situation, it is better that you be ready before applying for a personal loan. Thus, you must know a few things that can help you to avoid personal loan rejection. Following are a few tricks that can help you to have approval on the loan rather than rejection.

How to Avoid Personal Loan Rejection?

1. Maintain a good credit score: A credit score is the first step to checking if your loan can be approved or not or approved but a small amount. Thus, it can be the primary factor to look into so that you can avoid personal loan rejection. Following are the few things that you can do to maintain a healthy CIBIL or credit score.

  • Do not exploit more than 30% of your credit limit.
  • Keep monthly outgo of income ratio below 40%.
  • Make timely payments for your existing loans.

2. Have proper documentation: Documentation proves your eligibility, presence, and payback capacity. The lender gets to know you with them. Hence, having all the papers in proper format with clear information mentioned is important. It does not just help to avoid personal loan rejection but rather elevates the chances of approval.

In fact, many experts say that one should give more documents than asked, it helps them to save from any future problems on the loan as well.

3. Showing multiple sources of income: Income is the direct indicator of your payback capacity. So, you can use this as a tool to avoid personal loan rejection. Not just this, it could also give your borrowing eligibility a push, and you can ask for a better amount if needed. This is also helpful in case you need a top-up on your loan.

4. Stable income: Doing one job for a decent period or sticking to one profession tells about your sincerity. It says aloud that you are a dependable person and take finances seriously. This also tells that in the future you will continue the work, hence earning and paying back the loan on time.

5. Filling the application form properly: Improper loan application could be a big “No-No” for you. An online personal loan already has a short loan application. So, it is not a tiring process that you can be excused to be careless about. A proper application form filling can also show that you seriously need the money and not just take it for granted.

The application form acts as the window between you as a borrower and the lender, utilising this window properly and carefully is advised to avoid personal loan rejection.

So, before applying for a loan, make sure that you go through these points carefully to know what reasons can lead to your personal loan rejection, and what you can do to avoid it.


1. Can a personal loan be rejected after approval?

If the information you have provided is not true, there are chances for your personal loan application to be denied.

2. Will personal loan rejection affect credit score?

No. Loan rejections will not affect your credit score.

3. Can banks reject my loan?

Yes, banks can reject your loan if your CIBIL score is low. But there are higher chances of getting approved for a loan with FlexSalary, even if you have a low CIBIL score.

4. Should I have a good credit score to get a personal loan?

Having a good credit score helps you get a loan at a better interest rate. Moreover, a healthy profile definitely has lesser loan rejections.

5. What is the minimum salary needed to get a personal loan?

Usually, it changes from one lender to the other. At FlexSalary, you can apply and get a loan even with a salary of Rs. 8,000.