Seeking personal loan from an app? Here’s why your application may be rejected

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Were you looking for a personal loan? These days several personal loan apps claim to provide easy and quick approvals for personal loans. However, these apps often reject loan applications for various reasons. These may include insufficient documents, a low credit score, or not meeting the eligibility criteria.

Proper documents are crucial in successfully applying for a quick loan. According to Yogi Sadana, CEO CASHe, the documents required by a personal loans app are minimal. PreBefore sending the loan request, the borrower needs to carefully go through the documentation requirement list and prepare the documents.

“Apps like CASHe will ask the borrower to submit their identity proof, address proof, and income proof. The borrower must ensure they have at least one document in each category. Once the documents are submitted, the lender will review and notify the borrower about their application status,” Sadana told FE Online.

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Many banks or financial institutions also reject borrowers’ loan requests if they have a low credit score. The higher the credit scores, the better the chances their loan will be approved. So, before applying for a loan, the borrower should check and improve their credit score.

“If they (borrowers) have a low credit score, before applying for a personal loan online, we suggest that they try and improve their score. Paying off your outstanding credit on time and not over-using your credit card will help,” said Sadana.

Loan applications are also rejected if the borrower doesn’t have a job or a steady flow of income.

One of the prerequisites of the personal loan app is that the borrower is a salaried individual. If the borrower doesn’t have a fixed income, their loan request will most likely be rejected.

Sadana suggested that if the borrower is not employed or in between jobs, s/he should avoid applying for a loan. “If they have another source of income like rental income or investments in which they get monthly returns, that might also help them consider their loan request.

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Also, their employer should ideally be an MCA-registered company. It is essential that they submit the salary slip for 3 to 6 months, which means they need to be in a particular organization for that period,” he said.

Besides being a resident of India, they need to check if the loan app provides personal loans online in their city. Apart from the documents and the income details, one has to be eligible as per other criteria mentioned by the personal loan app. The borrower should be between the required age group to avail of the personal loan.

Factors considered while screening loan applications.

Lending platforms would want to know that the borrower can pay back what they borrow, and as such, they need to see that the borrower has a sufficient and consistent income. The income requirements vary based on the amount they borrow, but if they are borrowing more money, lenders will need to see a higher income to feel confident that the borrower can keep up with the payments.

Secondly, the lending platforms also consider the borrower’s debt-to-income ratio. Lenders would like to see a low debt-to-income ratio. They will examine their monthly debt obligations as a percentage of their income. Most lenders won’t accept their loan application if the borrower’s balance is more excellent than 43% – for example if their debt payments take up more than 43% of their income.

“Most lenders often look at the borrower’s credit score and report because it gives them insight into managing borrowed money. A low credit history indicates a borrower’s increased risk of default. This usually holds back many lenders because there’s a chance they may not get back what they lent the borrowers,” said Sadana.

“Lastly, providing the necessary documentation – be it income proof, residence proof, bank statements, and PAN card or any documents required to adhere to the KYC norms are necessary to complete the loan application process,” he added.