10 Reasons Why You Have Been Declined for a Loan

Your loan is rejected when your lender thinks it is a weak case. Many factors contribute to weakening your loan case. Let us take a look at ten of the major causes of your loan disapproval.

Why is Your Loan Getting Rejected or You Have Been Declined for a Loan?

Have you been continuously declined for a loan? Do you want to know the reason why? Read on to find the reasons behind your loan rejection:

1. Income

Depending on the bank, the minimum loan eligibility income varies. It is justified for the lenders to worry about whether you will pay them back on time. To get rid of this worry, they check your income. A stable and sufficient income indicates that you will repay the EMIs.

Most lenders have different income requirements for salaried and self-employed individuals. However, it is worthy to note that income here is considered the “take-home” salary excluding bonuses or incentives.

2. CIBIL Score

CIBIL score is yet another reason why most loans get rejected. CIBIL is an institution that records your borrowing behaviour. They note your unpaid credit card bills, late card payments, delayed EMI repayment, frequent CIBIL report generation, and more. The lender will request your CIBIL score, and if it is not good enough, your loan request is rejected.

3. Fund Utilisation

Loans are created for specific purposes. For example, a personal loan is meant to aid your monetary needs related to home renovation, marriage, education, or vacations. But if you utilise it to set up a business, it contradicts the utilisation of funds.

You must utilise the loan appropriately. If you apply for a personal loan, invest it in your personal needs. If you want to invest in your business, apply for a business loan.

4. Debt

If your existing debts are high, your loan might get rejected. For example, if you have multiple loans or credit cards, the lender will consider that you are overburdened with financial paybacks and deny your loan request.

Moreover, do not minimize your existing debts in the hope to get a loan. The lender will check your credit reports that contain every debt obligation. So, this misinformation can also lead to loan rejection.

5. Income Security

Monthly income is not enough for fulfilling a loan criterion. Remember, paying back a loan is a matter of more than five years. This is where security comes in. According to some banks, there are jobs such as those with higher employee turnover like BPO, pharmaceuticals, or insurance that are not considered secure. Your bank might not give you a loan if you belong to these.

6. NOC

NOC, No Objection Certificate, is a legal document that represents no outstanding dues. A lender gives this certificate to a borrower who has completely paid off their loan. If your CIBIL report does not mention this certificate, there is no legal proof that you have fully repaid the previous loan. Since lenders stand firm by their rules, if there is no NOC in your report, your loan is rejected.

7. Details

Another reason why your loan is rejected is due to inaccurate details. If you miss even one document or the lender spots an inconsistency of information, you are denied a loan.

Along with proper documentation, carefully filling out the application form is also important. Give correct details about yourself. If the lender finds even a minute inaccuracy, they will reject your loan.

8. Education

This factor depends on lender to lender. Some banks consider educational qualifications and require the borrower to be at least a graduate to qualify for a loan. Hence, check your lender’s educational requirements before applying.

9. Residential Stability

Apart from your employment confirmation, lenders want to know whether you have a stable living situation. You will be required to provide valid address proof to carry out loan procedures. If you live on rent, lenders will ask for additional details to confirm your stay. If there is an inaccuracy or missing information of residential proof, your loan is rejected.

10. Signature

Many of you might have heard to be extremely careful when signing your bank documents. If there is even a slight change of signature in any of your bank documents, the chances of loan rejection increase. Hence, your signature should remain the same everywhere.

Since it is tough, considering you have to sign at various places, your signature may slightly vary. But for smooth loan approvals, provide the same signature everywhere!


If you want to get instant loan approvals without dealing with continuous rejections, consider keeping in mind the above factors!

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