8 things to do immediately after your personal loan gets rejected

Next may feel like a door slammed shut in your face with no hope of even an opening; but contemplate these things as redirections, not closure. Rejections are commonplace and are often put aside for another day. This is quite an insightful manual on how to comprehend, handle, and get past that rejection of a personal loan application.

Key things to do after rejection of personal loan application

1. Sit for a moment and don't panic

The most vital and the very first step? Breathe! For all intents and purposes, a loan rejection does not mean a dead end. There are many reasons for the rejection of an application, the majority of which may be addressed over time and through further enlightening obligations of effort.

2. Understand the reason of rejection

Every rejection has its reasons. Therefore, speak to the lender and ask for a concrete justification in writing. Reasons for rejection may include:

• Low credit score.
• Insufficient income.
• High current debt levels.
• Job instability.
• Wrong or missing documentation.

Knowing the "why" puts you in a good position to plan your next move.

3. Review your credit report

Credit history is most paramount in determining acceptance for loans. Free credit reports are available from the credit bureaus, look for:

• Errors or outdated information.
• Inconsistencies in past payments.
• Unpermitted credit card entries or loans.

If you find mistakes, lodge a complaint and have them amended. An excellent credit score (750+) gives you a much higher chance of getting approved.

4. Debt to income ratio

For lenders, higher levels of debt to an income signal risks. Keep your debt income ratio below 40%. If it is greater:

• Pay off some outstanding loans.
• Don't apply for more than one loan at once.
• If possible increase your income through part-time jobs or freelance work.

5. Strengthen your application

• Stay in that job for at least six months, employees must show consistency before they make a new loan application.
• Send in correct and complete details yet again.
• Consider either reducing the amount of loan or extending the term.

6. Check alternative borrowing options

There are other options aside from banks. You can find:

• NBFCs usually have a bit of relaxed rules.
• Peer-to-peer (P2P) lending sites.
• Personal loans backed by assets, like real estate, insurance, and FD.
• Just ensure that the interest rates and terms are clear.

7. Wait, get better, and try again

Sometimes time is what we need. Make use of the delay to:

• Build your credit history.
• Settle your existing loans.
• Increase emergency savings.

Three to six months later, reapply to avoid multiple hits on the credit report.

8. Get professional financial advice

Talk to a professional and identify where things may have gone wrong. They can help you with your credit behaviour, provide you with guidelines that are developed for a specific lender, and help you on your way to better financial health.

In conclusion, yes, being rejected for a personal loan can be a bitter experience, but it comes with a warning. This is an opportunity to analyse, change, and hopefully, improve your financial situation. A well-crafted reapplication based on knowledge and work could soon change a "no" into a big "yes". Always remember the costs and interest rates associated with personal loans, to avoid any kind of debt burdens.

Disclaimer: Mint has a tie-up with fin-techs for providing credit, you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit score. Mint does not promote or encourage taking credit as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.