6 Reasons Why Your Instant Cash Loan Might Get Rejected
Did you know the pain of being rejected by your crush is equal to the pain of a rejected loan?
Think about it, in both cases you have a lose-lose situation. Not only do you feel hurt at rejection, but you also have to bear the consequences of it.
In case of your crush’s rejection, everyone knows you got rejected but in the case of a rejected loan, other lenders who you may apply for a loan with will know that your application was rejected and your credit score suffers.
Reasons why your instant cash loan might get rejected
1. Low Credit Score
Your credit score represents your creditworthiness and trustworthiness. Having a good credit score is essential to avail of any type of loan. The lower your credit score is, the harder it will be for you to avail a loan. Factors like poor repayment history, too many hard checks, and missed EMIs bring down your credit score.
A credit score below 500 is a red flag for the lender, who may hesitate to approve your loan. Even if your loan is approved, the lender will charge high interest to cover the risk of you defaulting on your loan.
2. High Credit Utilization
If you have a credit card and you spend above 30% of the total credit limit, that is considered high credit utilisation. Applicants with credit utilisation below 30% stand a better chance of getting approved for loans. Having high credit utilisation is one of the reasons your loan application can be rejected. It is best to keep your credit utilization below the stated percentage to maintain a good credit score and lessen the burden of debt.
3. High debt-to-income ratio
Lenders use the debt-to-income (DTI) ratio, the ratio of your gross monthly income utilised to pay your existing monthly debt payments, to assess your borrowing risk. A high debt-to-income ratio gives a bad impression to the lender and shows that you’re struggling to pay off your existing debt. If you have a DTI above 35%, lenders will hesitate to approve your loan application.
4. Insufficient or unstable income
Your income is one of the important factors that lenders consider when checking your eligibility for a loan. Lenders assess your income to determine if you can afford the monthly EMIs to repay the loan. If your income is insufficient or unstable for the loan amount you wish to borrow, the lender might reject your instant cash loan application.
5. Incomplete Documents
Imagine you apply for a loan at a bank, you endured the long queues and lunch breaks, moved from counter to counter and finally filed your application with the necessary documents. A few days later when you thought your loan must have been approved, the bank informs you that due to insufficient documents, your loan is rejected. Do you feel the frustration already?
Incomplete documents are the most common reason why loans are rejected. They cause unnecessary delays and rejections which add to your troubles when you are in need of money. Even if you apply for an instant cash loan online where less paperwork is involved, your loan application will be rejected if documents like salary slips and IDs are missing. That is why it is crucial to provide the right and complete documents to get your loan approved.
6. Multiple Hard Enquiries
It is human to feel desperate when you need money urgently but applying with multiple lenders will only lessen your chances of availing of an instant cash loan. Lenders carry out a hard credit check and having multiple hard enquiries during a short period can significantly hurt your credit score.
Here’s what you should do instead: Find out the eligibility criteria of various lenders and check if you match their requirements. Select one lender you’re positive will approve your application and apply for a personal loan. This will minimise the damage to your credit score due to hard enquiry.