Getting your loan application rejected can be frustrating, especially when you’re in urgent need of funds. But every rejection leaves clues. By understanding the reasons behind a rejection, you can fix the gaps and reapply with confidence.
In this blog, we’ll explore the most common reasons why loan applications get declined—and how to overcome each one.
Your credit score (like CIBIL) is one of the first things lenders check. A score below 650 can raise red flags.
Why it matters:
It shows your repayment history and creditworthiness.
Fix it:
Pay off credit card dues on time
Reduce credit utilization
Avoid applying for multiple loans at once
Dispute any errors in your credit report
Lenders evaluate your debt-to-income ratio—how much of your monthly income goes toward existing EMIs.
Why it matters:
A high ratio signals financial stress and low repayment capacity.
Fix it:
Close smaller loans or credit card balances
Consolidate debts if needed
Apply for a lower loan amount
Missing documents or wrong details can delay or derail the approval process.
Why it matters:
Lenders rely on paperwork to assess your eligibility.
Fix it:
Double-check all application fields
Upload valid and updated documents
Keep ID proof, income proof, address proof, and bank statements ready
Frequent job changes or insufficient income can make you seem like a risky borrower.
Why it matters:
Lenders prefer stable and salaried individuals with a regular income.
Fix it:
Apply after completing at least 6 months in your current job
Add a co-applicant with a higher income
Choose NBFCs or lenders with flexible criteria
Sometimes, people apply for loans without understanding if they’re eligible for that specific product.
Why it matters:
Each loan has its own set of rules. For example, business loans may need 2–3 years of ITR filings.
Fix it:
Talk to a loan advisor
Apply for a loan type that suits your profile
Understand the eligibility criteria in advance
Multiple applications in a short time lower your credit score and make you look desperate for credit.
Why it matters:
Every inquiry is recorded in your credit report.
Fix it:
Space out your applications
Use eligibility check tools (soft inquiries) before applying
Choose lenders that pre-approve based on your profile
If you’ve never taken a loan or credit card, lenders don’t have enough data to evaluate your risk.
Why it matters:
No credit score doesn’t mean good credit—it’s just unknown.
Fix it:
Start with a secured credit card or small consumer durable loan
Build a credit track record before applying for a bigger loan
A rejected loan isn’t the end of the road—it’s a signal to pause, review, and improve. By addressing the issues mentioned above, you increase your chances of approval significantly.
