5 Common Reasons for Personal Loan Rejection

Applying with a low credit score

A low credit score is the number one reason why most personal loan applications get rejected, and it's often the most fixable problem! Your credit score can range anywhere from 300 to 900, and here's the truth: the higher your score, the dramatically better are your chances of getting personal loan approval with favorable terms.

A CIBIL score of 685 or higher is generally considered the minimum acceptable score for most lenders, but a score of 750 and above is the ideal range that will get you quick sanctions with the best possible interest rates.

How to boost your credit score effectively:

• Make all payments on time: Never miss credit card payments, EMIs, or any other loan payments
• Pay off outstanding debts: Reduce your total debt burden, especially high-interest credit card debt
• Don't overuse credit cards: Keep your credit utilization below 30% of your total credit limit
• Maintain old credit accounts: Don't close old credit cards as they help build credit history length
• Check your credit report: Regularly monitor and dispute any errors on your credit report
• Avoid multiple applications: Don't apply for multiple loans or credit cards in a short period

Smart tip: If your score is below 685, spend 3-6 months improving it before applying. The wait will result in much better loan terms and potentially save you thousands in interest.

Submitting incomplete documents

Not submitting the complete and correct documents that prove your eligibility for a personal loan is one of the most avoidable yet common reasons for rejection. Many applicants rush through the documentation process without paying proper attention to the specific requirements, leading to unnecessary delays or outright rejections.
 

Here's how to get your documentation right the first time:

• Read requirements carefully: Pay close attention to the loan application guidelines before you submit your documents
• Create a checklist: Adhere to the exact list of documents that you need to submit and keep a detailed checklist handy
• Ensure document quality: All documents should be clear, legible, and current (typically not older than 3 months)
• Verify consistency: Make sure your name, address, and other details are consistent across all documents
• Keep extras ready: Have both original and photocopies available, plus digital scans for online applications
   

Good news: When you choose an online Personal Loan from Bajaj Finserv, you only need to complete basic document submission with minimal paperwork. Moreover, you can submit your application online, get approval within minutes, and have money deposited in your bank account in as little as 24 hours*.

Pro tip: Before submitting the required documents, it's highly advisable to use our personal loan EMI calculator and plan your loan repayment journey wisely. This shows lenders that you're a thoughtful, prepared borrower.
 

Additional Read: What is repo rate

Not having a steady source of income

Lenders pay extremely close attention to and thoroughly check your ability to repay the loan consistently over time. Income stability is often more important than income amount – a steady ₹30,000 monthly salary is often viewed more favorably than an irregular ₹50,000 monthly income from freelancing or business.

If you don't have a steady, verifiable job with consistent monthly income, it is very likely that the lender will assume that you don't have the reliable financial means to service the loan in a timely fashion throughout the entire loan tenure.

How to strengthen your income profile:

• Job stability: Avoid applying for a loan when you have just switched jobs (wait at least 3-6 months in the new role)
• Multiple income sources: In the absence of a traditional job, ensure that you have other verifiable sources of income, such as rental income, interest payouts, dividends, or freelance contracts
• Income documentation: Keep proper records of all income sources with bank statements showing regular deposits
• Employment type: Government employees and employees of well-known companies often get preferential treatment
• Income growth: A history of increasing income over time shows positive career trajectory

Why this works: Demonstrating multiple, consistent income streams will significantly help you secure a personal loan more easily and often at better terms.

Special note for non-traditional workers: If you're self-employed, a freelancer, or have irregular income, consider providing additional documentation like tax returns, client contracts, or business registration documents to prove income stability.
 

Additional Read: How to get a loan without a job?

Not matching other eligibility criteria

Apart from your identity and income, you need to fulfil other personal loan eligibility criteria set by the lender, such as being the right age. Besides, you must also be in a city that the lender operates in to get the loan. Since these factors are out of your control, your best bet is to choose a well-known lender that offers pan-India coverage. Armed with the knowledge of what not to do and how to rectify shortcomings in your loan application, you are sure to get a quick sanction.

Multiple pending loans

Applying for multiple loans simultaneously or having multiple pending loans ingoing can adversely affect your creditworthiness and are the loan rejection reasons. Lenders assess your credit report, and multiple pending loans may signal financial strain, making you appear riskier to lend to. Each loan application triggers a hard inquiry on your credit report, potentially lowering your credit score. To improve approval chances, carefully consider and prioritise loan applications, addressing existing debts before seeking new financing. Maintaining a healthy credit profile enhances your overall financial credibility.

Eligibility criteria

• Nationality: Indian
• Age: 21 years to 80 years.
• Employed with: Public, private, or MNC.
• CIBIL Score: 685 or higher.
• Customer profile: Self-employed or Salaried

*You should be 80 years or younger, at the end of the loan tenure.

Documents required

• KYC documents: Aadhaar/ passport/ voter’s ID/ driving license/ Letter of National Population Register/ NREGA job card
• PAN card
• Employee ID card
• Salary slips of the last 3 months
• Bank account statements of the previous 3 months
• Piped gas bill
• Pension order
• Letter of Allotment of Accommodation Issued by Employer
• Property / Municipal tax receipt
• Utility bill
• Phone bill
• Real-time image / photograph
• Ration card

Check your eligibility for personal loan using just mobile number and OTP – 100% online process. 

Step-by-step guide to apply for a personal loan

1. Click on ‘CHECK ELIGIBILITY’ on this page.
2. Enter your 10-digit mobile number and the OTP sent to your phone.
3. Check if you have an offer. If not, fill in the application form with your basic loan details, such as your full name, PAN, date of birth, and PIN code.
4. Now, click on ‘PROCEED’ to visit the loan selection page.
5. Enter the offer or loan amount that you need. Choose from our personal loan variants.
6. Choose the repayment tenure and click on ‘PROCEED’.
7. Complete your KYC and submit your application.

Our representative will contact you for further steps.