Availing a personal loan is one of the easiest ways to get rid of your financial burden occurred due to any unexpected or sudden expenses. You can also opt for a personal loan to fulfil your travelling to your dream destination, renovating your house, cover expenses of marriage, education, monthly house rent, without providing any collateral or security to avail the loan. You can use a personal loan to meet any of your personal financial needs without any restrictions or limitations at the end use of the funds.
However, the question is, what would you do if you are denied the personal loan in your first attempt?
What would be the next step to take in such a case of rejection? What is the actionable thing to do to avoid any such rejections in the future?
If your personal loan application is denied at the very first attempt, the very first thing you must do is start finding out:
- why the request was denied
- what steps should be taken
- how long you must consider before applying for a new one
- how to avoid the occurrence of such situations in the future
- what would be next right move
These points will help you to figure out what went wrong during the entire application process and help in preventing such happenings again. You will come across certain actionable in this article, to help you avoid such situations in the future.
First and foremost, always analyze your situation
Primarily try to figure out why your loan application was not approved. You can also ask the lender about the reasons for the rejection of the loan application. Analyzing will help you understand the next plan of action and will help to avoid such an instance in the future.
Some of the common reasons for the denial of personal loan applications include default in the loan payments in the past, not having enough income, your affordability for the new loan if you already have one, etc.
To avoid such situations, you can ensure that henceforth you keep your high credit score and history of repaying loans clear. If your credit was the fault, then the lender will provide the notice of adverse action which can help improve your credit. Also, if your income is quite low or does not fit the eligibility criteria, then wait for a few months until your annual cycle of increment comes. Also, you can check your eligibility and other related information with the personal loan eligibility calculator.
Be calculative before re-applying for the next loan
Before re-applying for the loan, check if there are any warning signals in your credit, also check if your income is enough and eligible to avail personal loan.
Furthermore, next time, you can ask the lender to examine the credit report and let you know if there are any issues. By talking to the lender, you will get a clear picture of what exactly the matter is and how long you will have to wait before re-application of the loan.
After collecting this information, try fixing the errors and shortcomings in your credit report. In addition to this, work on paying off the previous debts as reducing this expense makes you look good as a borrower and increase your credit score.
Time to take some immediate steps
Rejection of personal loan indicates that it is time for you to take your finances seriously.
These are certain steps you should take into immediate effect on to improve your credit score, and thereby would increase the probability of the loan application approval in the future.
Step 1: Offer to pledge something valuable to help secure the loan (takes risks only if it makes sense as it may lead to losing your security or collateral).
Step 2: If your income is not sufficient enough, calculate EMIs using the personal loan calculator. Check your eligibility to get your loan application approved. In some cases, you can add a cosigner* to the application that has a better income and credit.
*Note: The person whose income or credit is added to your application is termed as a cosigner and is responsible for repaying the loan if you fail to repay.
Step 3: There can be chances wherein your lender might not approve your loan, whereas a different lender might approve. For such instances, hunt for some other option instead of waiting for re-applying for the same lender.
Opt for some long term strategies
Apart from the above short term strategies, some long-term strategy can help to keep your credit score healthy in different ways:
- If you already have an existing loan, clearing old debts would be a positive sign for a lender. For this, you can pay back as much as possible to the lender and contact your creditors to work on a payment plan for you which will eliminate negative information from your credit reports.
- Another way of the strategy could be looking for a job that can pay you higher pay. Or join an MNC or a blue-chip company for a better scale and to increase the chances of getting your loan application approval.
- If you have an existing personal loan, try to go for a longer tenure as this will decrease your EMIs, making it feasible for you to pay monthly interest.
- Having a life insurance policy may help as some plan do offer the option of availing a loan.
These are some of the working actionable that can ensure approval of personal loan if your application was denied in your very first attempt. Next time, before opting for a loan, it is advisable to check your eligibility through personal loan eligibility calculator as it will avoid rejections.