Credit score to bills: Steps to take if your loan application is rejected

Paying loan instalments on time is crucial for maintaining a healthy credit profile, reducing the chance of loan rejection

Don't want to miss the best from Business Standard?

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.