This way you can Avoid Rejection of Loan
Lenders evaluate loan applications based on a number of characteristics. The loan applicant's credit score, monthly income, work profile, and employer profile are the most important. Those who do not meet the lender's eligibility requirements may have their loan applications denied. Here are some pointers to help you on how to avoid loan rejection:
Work to Improve Your Credit Score
One of the most important stages in improving your loan eligibility is to build and maintain a decent credit score. Lenders often prefer to lend to persons with credit scores of 750 or above. Those with a lower credit score, on the other hand, are said to lack credit discipline and, as a result, are more likely to fail on repayments.
Those seeking loans should concentrate on establishing and maintaining a good credit score by practicing healthy financial habits such as timely repayment of EMIs and credit card bills, keeping their credit utilization ratio (CUR) under 30%, maintaining a good credit mix, and closely monitoring co-signed or guaranteed loan accounts.
Examine Your Credit Report on a Regular Basis
Credit bureaus determine your credit score based on the information in your credit report given by lenders and credit card providers. As a result, any erroneous information in your credit report as a result of clerical errors made by lenders or the credit bureau, or any fraudulent loan or credit card activity done in your name, can have a negative influence on your credit score. This, in turn, may have a negative influence on your loan eligibility.
As a result, examine your credit report on a regular basis. This will give you enough time to notice and report false information to the appropriate agency or lender for correction. A corrected credit report instantly raises your credit score.
Compare Loan Offers From Different Lenders
Because of variations in lenders' cost of funds and individual loan applicants' credit risk, interest rates, processing fees, and loan length for the same loan type might vary greatly. As a result, before submitting a final loan application, loan seekers should evaluate loan offers from as many lenders as feasible.
Because many lenders provide better rates or other terms and conditions to current clients, a potential loan application must first contact the banks and lenders with whom they have an existing deposit and/or lending connection. Following that, contact internet financial marketplaces to evaluate interest rates and other loan characteristics given by competing lenders. This will help you receive the best offer possible based on your loan requirements and eligibility.
Choose a term based on your ability to repay
Your loan repayment ability will be determined largely by your monthly discretionary income after taking into account monthly required costs, current EMIs, insurance premiums, and investing contributions toward inescapable financial objectives, among other things. Lenders like to lend to people whose entire repayment responsibilities, including the additional loan, are less than 50-60% of their monthly income. As a result, people who surpass the stipulated limit have a decreased likelihood of loan acceptance.
Applicants who exceed this limit should endeavor to decrease their loan payback commitments by prepaying/foreclosing some of their current debts, choosing longer loan terms, and/or putting a larger down payment on their new loans.
Once you've determined your financial ability, choose the shortest payback period to lower your interest costs. Applying for a loan after determining your optimal EMI reduces the likelihood of future default.
Avoid Submitting Loan Applications to Multiple Lenders.
When you apply for a credit card or a loan, the issuer/lender gets your credit report from the bureau in order to determine your creditworthiness. Such credit report requests from lenders are termed hard inquiries, and each one might have a little impact on your credit score. As a result, making several loan or credit card queries in a short period of time might severely lower your credit score. Instead of submitting loan applications to different lenders, use online financial markets to get the best loan offer based on your credit score, work profile, income, and other qualifying requirements. While these markets would also get your credit report in order to provide lending possibilities, queries made by online financial marketplaces are considered soft inquiries and have no influence on your credit score.
Avoid Frequent Job Changes
When analyzing loan applications, lenders examine the employment stability of salaried loan applicants. Because lenders view frequent job changes as a sign of professional insecurity, persons who change jobs frequently may have a decreased chance of getting their loans authorized. As a result, people who intend to apply for loans in the near future should avoid frequent employment changes.