A customers personal loan application goes through the credit screening process to check the customer’s loan eligibility. Banks would consider various factors before sanctioning or declining loan application based on certain key parameters. Loan application gets rejected If a customer does not meet their lending criteria.

Bad CIBIL History or Credit score

Lenders look at your credit score to determine how likely you will repay the loan on time. A low credit score gives a lender an understanding that you had issues in repayment, delayed, defaulted on payment of the previous lenders.

The credit score is three digit score by Credit bureaus such as CIBIL, Experian, Equifax and CRIF Highmark. The standard CIBIL score ranges from 300 to 900.  A high score of customers can easily get a loan at a lower interest rate. The low credit or bad credit score customer even if get accepted by some NBFC, they will get the loan at a higher interest rate because of high-risk category customer.

Thin credit profile

A thin profile customers are those who did not borrow previously (New to credit) or has a limited credit history. Banks rejects the personal loan application because they are reluctant to take the risk of first-time borrowers.

However, some banks have strict lending criteria such as salary should be above Rs. 30,000, length of employment should be more than 2 years in the current company. The company must have higher paid-up capital and should be listed with banks.

Higher Debt Burden

Banks determine the monthly debt obligation which should not be more than 50-60% of your Salary or Income. Your debt to income ratio is an indicator of your debt burden, lower it is better. Bank rejects loan application if you are applying for the personal loan in addition to high outstanding credit card bill because new loan will further add EMI repayment burden on you.

Low Salary or Income

Every Bank or NBFC has basic income criteria which should be minimum 25,000 per month. However, the salary criteria for the metro city is higher as compare to non-metro cities. Low salary and higher debt obligation to pay per month is one of the reasons for personal loan application rejection You should clear or reduce the credit card bills and other loan repayment obligation before applying for the personal loan.

Employment Stability

Your personal loan application may get rejected if you change your job frequently. Most of the lender consider minimum 2 years tenure in the current company to qualify for the loan.