Why Did My Loan Application Get Rejected? Top Reasons & How to Fix Them

A loan rejection can be frustrating, especially when you’re in urgent need of funds. Banks and NBFCs follow strict eligibility criteria before approving loans. Let’s understand the most common reasons behind rejections and what you can do to avoid them.

1. Low Credit Score

Your CIBIL score plays a crucial role. A score below 650 is often seen as risky.
Fix: Pay EMIs on time, reduce credit card usage, and clear outstanding dues.

2. High Debt-to-Income Ratio

If your existing EMIs take up more than 40–50% of your monthly income, lenders hesitate to approve new loans.
Fix: Repay or close smaller loans before applying for a new one.

3. Unstable Employment History

Frequent job changes or working in companies with low stability can raise red flags.
Fix: Maintain at least 6–12 months of continuous employment before reapplying.

4. Incorrect or Incomplete Documentation

Even minor errors in documents like PAN, Aadhaar, or income proof can cause rejection.
Fix: Double-check all documents and ensure they are up to date.

5. Applying for Multiple Loans at Once

Every loan application triggers a hard inquiry on your credit report. Too many applications make you look credit-hungry.
Fix: Apply only to 1–2 lenders after checking your eligibility.

Pro Tip: Before reapplying, check your credit report, improve weak areas, and use a loan eligibility calculator to increase chances of approval.

Remember, a rejection is not the end. By improving your financial profile and credit habits, you can secure loan approval in the future with better terms.