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7 tips to avoid being rejected for a personal loan
How to get your personal loan application into the approved pile.
Every rejected personal loan application is listed on your credit file, so it’s really important to take the time to give your loan application a better chance of approval. Learn some helpful tips to avoid your personal loan being rejected.
7 tips to increase your likelihood of being approved for a personal loan
Which steps should you take to increase your chances of getting your application into the “approved” pile? Here are our 7 favourite tips:
1. Check the credit requirement
If you’re unsure about credit requirements, ask the lender before applying. The majority of lenders have online chat services – as a minimum – that can offer assistance. If you don’t meet the credit requirements, your application may be rejected immediately.
2. Check the minimum income requirement
Each lender will have a different minimum income requirement, and this minimum may differ depending on the loan product you’re considering. Always apply to a lender who is willing to grant loans that meet your income threshold. This not only increases your chances of being approved for a loan but also means that you’re more financially able to make repayments.
3. Ensure the purpose of your loan is permitted
Check with the lender to see if your loan purpose is permitted. For instance, some providers state that their loans may only be used for short-term credit crunches; not luxuries like wedding-related expenditure or vacation expenses.
4. Verify your details
Is your application filled out completely? Have you provided any incorrect information? Either of these can lead to rejected applications. In more serious cases, filling out key information incorrectly may be deemed as dishonesty by your loan provider.
5. Check that you meet the employment requirements
Do you need to have been in your role for a certain amount of time? Do you need to be receiving a regular income into your bank account? See what the lender requires regarding your employment status and know which key documents you need to back up your employment details.
6. Don’t hold more loans than you can afford
You could look at consolidating your loans or paying some of them back before applying for any new ones. Holding multiple loans both increases your chances of defaulting and could also affect your credit score in the long term.
7. Check that your collateral is sufficient
If you’re applying for a secured loan, check what your lender requires regarding collateral and check that the asset you plan to use meets their requirements. When in doubt, get in touch with the lender before applying.
Find more personal loans
Now that you know what to look for to avoid getting rejected for a personal loan, compare a range of loans to apply for below.
Things to consider when applying
- Avoid multiple applications. When you apply for a loan, the creditor will list it on your credit file. Too many applications in a short span of time can have a negative impact on your credit rating.
- Keep your record clean. Pay your debts on time and not default on any loans. Keep track of your financials and don’t take on loans if you aren’t completely sure that you’ll be able to afford all the repayments.
- Check your credit report. Monitor your credit file (more on this below) and ensure the information is up to date. You need to take out outdated data, erroneous entry and other irrelevant information.
7 reasons why personal loans get rejected
- You have a bad credit history. While “bad credit” is usually pooled into one, there are varying levels of bad credit. For example, you may have never defaulted on any loans or credit cards, but you might have applied for five loans in the past two months. Check your credit score with the Credit Bureau Singapore (CBS) to see where you stand.
- Insufficient income. Lenders usually have a minimum income requirement that you need to meet to be eligible for the loan. Generally, most banks in Singapore will require a minimum annual income of at least $30,000.
- Unsuitable loan purpose. Many loans come with restrictions as to how the funds can be used. Check that you’re able to finance what you need to with the loan you’re applying for.
- Incorrect details. Your personal loan may get rejected if there are inconsistencies in your application.
- Unstable employment. Lenders typically insist that you have a stable job and are out of your probation period. Probation period times differ, but lenders usually require at least three months of payslips or six months for casual employees.
- You hold too many loans. Lenders may reject a personal loan application if you’re currently holding several loans. Avoid applying for more than one personal loan at a time as, from a lender’s point of view, this looks like risky behaviour. What’s more, it can quickly lead to a spiral of debt.
- Low value of secured assets. Lenders usually have restrictions on the type of asset you can use as collateral for a secured loan. If your asset doesn’t meet these requirements, your personal loan could be rejected.
Related reading: How much should you borrow for your car loan?
Bottom line
There’s no way to completely guarantee that your personal loan application will be approved. Even if you meet all the eligibility criteria listed by a lender, the lender can still reject your application at its discretion.
However, you can avoid common mistakes that lead to personal loan application rejection and follow the tips we’ve discussed to improve your chances of approval. You can also compare your personal loan options to find more lenders you may be eligible for.
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