Hyderabad: We approach banks for a loan when we want to buy a house or a car. When an unexpected need arises, we even apply for a personal loan though the interest rates a little bit higher. Even if we provide all necessary details in our loan application, sometimes there are chances that the bank may reject it. How to overcome such a situation?
Interest rates are increasing steadily. As per reports, the demand for retail loans is increasing. Hence, banks are examining every application meticulously. They are weighing all pro and cons before deciding to consider the application of the borrower. Under such circumstances, if your loan application gets rejected, first find out the reasons.
Usually, the bank or the non-banking financial company (NBFC) clarify on reasons for rejecting a loan application. Low credit score, inadequate income, instalments already touched 50 percent of income, late payment of EMI, frequent change of jobs are among the main reasons for disputes in the case of buying a house. Errors in the credit report can sometimes lead to rejection of a loan application.
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You must ensure a good credit report. In order to have a good credit score, instalments in existing loans must be paid on time. A credit score above 750 is less likely to get a loan application rejected. If the application is rejected due to low score, try to increase the score. Paying instalments and credit card bills on time will gradually increase the score.
Use credit cards less for a few days. Don't cancel existing credit cards. Applying for new cards will have a negative effect on the score. The new loan company will also look at existing loans and the EMIs being paid on them. Your present EMIs should not exceed 45-50 percent of your total income. If the ratio of instalments in your income already reaches this level, banks will not consider giving a new loan.
Every time you apply for a loan or credit card, the details are entered into your credit report. It is never a good idea to apply for more loans in a short period of time. If the application is rejected once, then the same will be repeated. Hence, two or three loan companies should not be approached at the same time. By doing this, the lending institutions think that you are desperate for loans. It will become a problem for you.
You can get your credit report on a monthly basis. You can keep updated about your credit score from time to time. Many companies now offer it for free. This report includes all transactions related to your loans. If your loan application is rejected because of low credit score, take care. Until the score reaches 750, do not go for a new loan. Wait at least 4-12 months for the score to increase. If you already have a score of 750, it will increase in no time.
