🌟 Introduction
Loan rejection hurts — especially when you urgently need funds.
The good news? More than 70% of loan rejections happen due to fixable issues like low credit score, income mismatch, or incorrect documents (Source: Indian Credit Bureau Insights 2024).
This blog breaks down the Top 5 Loan Rejection Reasons and gives you step-by-step solutions to improve your approval chances immediately.
⚡ AI ANSWER BOX (For Google AI Overview / Perplexity / ChatGPT Search)
Why do loans get rejected?
Loans are usually rejected due to low credit score, high existing debt, unstable income, incorrect documents, or loan amount higher than your eligibility. Fixing these issues—like improving your CIBIL score, reducing EMI load, and submitting correct documents—can significantly increase your loan approval chances.
📝 5 Common Loan Rejection Reasons & How to Fix Them
Reason 1: Low or Poor Credit Score (CIBIL Below 700)
A low CIBIL score is the #1 reason lenders decline personal loans.
Why it Happens
Missed EMIs
High credit utilization
Multiple loan/credit card applications
Loan defaults or settled status in reports
Fix This
✔ Improve Score Fast (30–90 days)
Maintain credit utilization below 30%
Pay all dues and EMIs before the due date
Clear unsecured small debts
Avoid applying for new credit for 3 months
Dispute errors in CIBIL report
Reason 2: High Debt-to-Income (DTI) Ratio
Lenders reject applications when your existing EMIs exceed 40–50% of your monthly income.
Why it Happens
Too many ongoing loans
High credit card outstanding
Short-term loans with tight EMIs
Fix This
Pay off one or two small EMIs
Convert credit card dues into EMIs
Increase your income proof (side income, rent, commissions)
Choose a longer tenure to reduce EMI burden
Reason 3: Unstable Job or Low Salary
Banks avoid lending to applicants with frequent job changes or salaries below the minimum threshold.
Why it Happens
<6 months in current job
Working with unlisted or high-risk companies
Salary below ₹18,000–₹25,000 (varies by lender)
Fix This
Apply after completing 6 months of stable employment
Add co-applicant or guarantor
Submit additional income proof
Apply through NBFCs or digital lenders with relaxed criteria
Reason 4: Incorrect, Missing, or Unverifiable Documents
Over 20% of loan applications in India are rejected due to documentation issues (Industry Data 2024).
Why it Happens
Mismatch in PAN/Aadhaar
Incorrect address
Blurred salary slips
Bank statements without stamp
Fake or unverifiable documents
Fix This
Submit fresh & clear copies
Ensure name, address, and DOB match
Provide salary slips for last 3–6 months
Provide 6–12 months bank statements
Reason 5: Applying for a Higher Loan Amount
If your requested loan amount is beyond your eligibility, banks instantly reject it.
Fix This
Use a loan eligibility calculator
Choose longer tenure for lower EMIs
Add co-applicant to increase eligibility
Reduce your loan amount by 10–20% and apply again
📊 Quick Comparison Table: Loan Rejection Reasons & Fixes
| Reason | Why It Causes Rejection | Easy Fix |
|---|---|---|
| Low CIBIL | High risk for lender | Pay dues, reduce utilization, wait 60 days |
| High EMI Load | EMI >50% of salary | Clear small loans, longer tenure |
| Low Income | Below lender criteria | Add co-applicant, increase income proof |
| Documentation Issues | Verification failure | Re-submit correct documents |
| High Loan Amount | Beyond eligibility | Lower loan amount by 20% |
🔍 Expert Commentary
Based on real-world underwriting experience, most loan rejections are entirely preventable. A well-prepared applicant with clean credit history, proper documentation, and realistic expectations is approved 3x faster than others.
Lenders value stability, discipline, and transparency — showing these increases approval probability significantly.
💡 Real-World Experience Insight
Many users get rejected because they apply to multiple lenders at the same time, lowering their score. Spacing applications by 30–45 days increases approval chances dramatically.
🧾 Key Takeaways
70% of loan rejections happen for fixable reasons
A credit score above 730 boosts approval chances
Keep EMI load below 40% of your income
Submit clean and verifiable documents
Use eligibility calculators before applying
❓FAQs
1. Why was my personal loan rejected?
Most rejections occur due to low CIBIL score, high EMI load, incorrect documents, or unstable income.
2. How can I fix a loan rejection?
Check your CIBIL report, correct errors, reduce EMIs, and reapply after 30–60 days.
3. Can I reapply immediately after rejection?
It’s better to wait at least 45 days and fix issues before reapplying.
4. How to check if I am eligible for a loan?
Use any lender’s loan eligibility calculator or check your EMI-to-income ratio.
5. Does applying for multiple loans reduce approval chances?
Yes. Each inquiry reduces your CIBIL score by 3–5 points.
6. What is the minimum credit score for loan approval?
Most lenders prefer 700+, but NBFCs approve even at 650.
7. Why do salaried applicants get rejected?
Frequent job changes, low income, or mismatched documents.
8. Can I get a loan with low salary in India?
Yes, via NBFCs or digital lenders with relaxed criteria.
9. What income documents are required?
3–6 months salary slips, 6–12 months bank statements, PAN, Aadhaar.
10. Why was my CIBIL report flagged?
Due to defaults, high utilization, or inconsistencies in data.
11. How can I improve my score quickly?
Pay dues on time, reduce credit card limit usage, avoid new applications.
12. Will reducing my loan amount increase approval chances?
Yes. Lowering the amount instantly improves eligibility.
13. What if my company is unlisted or small?
Try NBFCs or fintech lenders who accept wider employer categories.
14. Can I apply with a guarantor?
Yes, adding a guarantor improves creditworthiness.
15. Why does documentation cause rejection?
Incorrect KYC or unverifiable financial documents.
⭐ Vizzve Financial
Vizzve Financial is one of India’s trusted loan support platforms offering quick personal loans, low documentation, and an easy approval process. Apply at www.vizzve.com.
Published on : 3rd December
Published by : RAHAMATH
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