We all know that if we have a good credit score and a good source of income, we can get any loan easily but this is not true every time. Having an excellent credit score doesn’t guarantee you a loan. A score of 800+ is considered as an excellent credit score. It shows your detail planning and management of finances that means you will pay off debts on time and avoid defaults. Maintaining a good credit score will make you highly eligible for a loan. However, in some cases, your loan can be rejected regardless of your high credit score. Let us see some reasons:
Guarantor for a defaulted loan:
A Guarantor is a person who has signed the loan documents of another person, that means if the primary borrower failed to repay the loan, then the guarantor should pay the remaining amount on his or her behalf. In such cases, lenders reject your loan application if you apply for a loan.
If you have past loan rejections, it will visible in your credit history forever. Whatever may be the reason for the loan rejection, it will reflect badly and will leave a negative impression on your future lender. It shows that you have not been financially responsible in the past, even if your current history depicts fully paid loans.
Co-applicant’s poor Credit history:
If you are not eligible to borrow a big loan amount, lenders advise you to take co-applicant. Don’t take anyone blindly as co-applicant. Make sure that their credit history is good or better than yours. If their credit history is poor, then your loan application gets rejected or you will be offered a less loan amount.
Details match with the defaulters:
NBFCS and banks maintain all the personal, financial and professional details of the defaulters. So if your age, name, address and employment details match with that of any defaulter, then your loan application either stuck for a longer period or get rejected.
Living in an area surrounded by defaulters:
Loans can also get rejected if you are living in the home of a defaulter or you are working in the company where even fewer of your colleagues have defaulted. Lending institutes and banks keep a detailed record of the houses, localities, and companies that have a high risk of defaulting.
Some persons take too many loans at the same time. Suppose, if a person is paying more than 50% of his income as EMI, then what he will pay for his new loan as EMI. In such cases, new loan application gets rejected by the financial institutes to avoid the risk.
If you change your job frequently, then lenders show less interest to provide you a loan. Banks and financial institutes give a loan to the person who is stable in their job positions for at least 3 years.
Don’t feel bad, if your loan application was rejected. You would have worked hard to improve your credit score, but there are certain factors that affect your loan approval. See what the problem is and try to fix it. If your problem is not getting fixed quickly, you can choose other sources for borrowing.