![Credit score to bills: Steps to take if your loan application is rejected 1 bs logo](https://thespuzz.s3.ap-south-1.amazonaws.com/thespuzz/uploads/2022/08/05041910/bs-logo.jpg)
Illustration: Binay Sinha
Whether you’re applying for a mortgage, personal loan, or business financing, a rejection doesn’t mean you should give up on your financial goals. Here’s what to do if your loan application is rejected:
Find out why your loan application was rejected. Lenders are required to provide reasons for rejecting an application. Common reasons for rejecting personal loan applications include:
Poor credit score
Insufficient income
High debt-to-income ratio
Incomplete application
Lack of credit history
Review your loan application for any weaknesses.
If your income is insufficient, consider adding a co-applicant or guarantor. Ensure all documents are complete and accurate.
Improve your credit score
Improving your credit score by using these strategies:
Pay bills on time.
Reduce credit card balance.
Do not apply for multiple loans in a short period.
Maintain a healthy mix of credit types.
Explore alternative lenders
If traditional banks have rejected your application, consider alternative lending options such as:
Non-Banking Financial Companies (NBFCs)
Peer-to-peer (P2P) lending platforms
Microfinance institutions
Digital lenders
Reduce your debt-to-income ratio
Lenders want to see that you have enough income to comfortably cover your loan payments along with your other financial obligations. To lower your debt-to-income ratio:
Pay debts.
Increase your income through a side job or freelance work.
Avoid taking on new debt until your loan is approved.
Consider consulting a financial advisor who can provide personalised guidance on improving your creditworthiness and exploring suitable loan options.
First Published: Jun 28 2024 | 12:55 PM IST