6 Common Reasons for the Rejection of a Personal Loan

"Learn the reasons for personal loan rejection so that you can avail the personal loan benefits without any rejection."

6 Common Reasons for the Rejection of a Personal Loan

3 mins read

Published: 5 June 2024

Updated: 5 June 2024

When it comes to immediate financial emergencies only your savings are not sufficient to manage the expenses and you might need a personal loan to cover those financial expenses. But when you apply for a personal loan online there may be some reasons for rejection of the loan application.

In this blog let us understand the main reasons for the rejection of personal loans one by one.

Reasons for Rejection of a Personal Loan

Applying for a personal loan online is an easy process but there may be a possibility that your personal loan gets rejected due to various reasons. Let us learn the reasons for personal loan rejection one by one:

1) Low Credit Score

A three-digit number that reflects your creditworthiness. And a low credit score is a cause of personal loan rejection. To maintain and enhance your credit you must pay off your credit card bills and loan EMIs on time and monitor your credit score regularly. A credit score of 750 and above is considered a good score and lenders may provide you with a personal loan easily. Your personal loan application will only be accepted when you have a good credit score. In case you do not have any credit history then too your personal loan application might get rejected by the lender.

2) Insufficient Income

A stable income of a borrower is a sign that you have enough capability to repay the EMI on time. Lenders prefer going through the borrower's income as part of their eligibility criteria for personal loans. So if in case there are chances of rejection of your personal loan application due to your low income then talk to your lender regarding it because some lenders may consider it sometimes.

3) High Debt-to-Income Ratio

This ratio compares how much money you owe each month to how much money you earn. The debt-to-income ratio allows the lender to evaluate the borrower's ability to manage the monthly payments to repay the loan amount you plan to borrow for your personal needs. If a big part of your income goes on paying off your debt then the lender might consider you can't pay more debts. A low debt-to-income ratio makes it easy to get personal loans online. To lower your debt-to-income ratio try paying off your credit card debt or other debt and try to increase your monthly income by taking on extra work.

4) Incomplete or Inaccurate Application

While filling out the application, fill in the details carefully, the information you provide must be complete and accurate, or else your application will be rejected. The wrong information in the application can lead to fraudulent cases and you may face problems in the future. Lenders need correct and accurate information in your application. To avoid such an issue double check your application and make sure you are proving every document to the lender before submitting the loan application form. If there is any problem or confusion regarding the same then contact your lender and resolve the issue with ease.

5) Unstable Employment History

A borrower with a stable job history has a steady monthly income and the lender considers them to provide a personal loan. A lender might see you as a risky borrower if you are frequently changing jobs and are unemployed for a period of time. Lenders may think that you do not have any stability and a regular source of income.

This instability in the job might result in loan rejection so to decrease the chance of rejection try to be stable and work with the same company, even if you have switched, provide the lender with stable income proof and give a valid reason to switch the company. This would help you to avail personal loan online easily without any hassle.

6) Multiple Loan Applications

Your credit score might be adversely affected if you keep on applying for several loans in a short span of time. If you are seeking multiple loans then the lender might be prejudiced that you are having financial trouble. This would result in the rejection of your personal loan application. So think before applying for any loan, only in emergency situations and financial breakdowns apply for a loan. Research various lenders and then apply for personal loans online. Rather than facing future rejections, make wise decisions in the present and then apply for personal loan.


After knowing all the reasons for personal loan rejection you might not face any difficulty in applying for a personal loan. Low credit score, insufficient income, high-debt-to-income ratio, incomplete or inaccurate application, unstable employment history, and multiple loan applications are a few reasons for the rejection of personal loans. By keeping in mind all these factors you can enhance the chances of getting a personal loan and can avoid rejection.

Have you ever been denied a personal loan? Share your experiences and if you need professional financial advice, don't hesitate to seek it out. For more tips and resources on improving your chances of loan approval, feel free to contact us or visit our website.

Also read: How Salaried Employees Can Get a Personal Loan in India

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