LOANS AND THEIR REJECTION

LOANS

As per financial meaning, loan is a debt provided by one entity (Banks, NBFC, FI's, other organizations or individual) to another entity at an interest rate Usually, there is a predetermined time for repaying a loan, and generally the lender has to bear the risk that the borrower may not repay a loan. There are various types of loans and they can be classified as secured, unsecured, demand, subsidized and  concessional. Loans can be personal (eg. car loan, mortgage loan, credit cards etc) or commercial (commercial mortgages and corporate bonds).

WHY ARE LOANS REJECTED ??

Reasons for loan rejection can be many because when you apply for a loan, banks judge your ability to repay the loan. They consider various factors such as age, income, job stability etc. but major impact is bought through your credit report, which shows your creditworthiness and thus loan turns down if your CIBIL report is not good. Some of the major reasons can be as follows :

1. Defaulter's list contains your residential address: If you live at a same address as someone who has defaulted on a loan payment or credit card dues and hence been reported to CIBIL, banks probably will have the address stored in their defaulters' database. In such a case, the probability of your loan application to be rejected becomes high.The reason being your residential address will automatically match with the one on the defaulters' list.
2. Accumulated dues of credit card or loan repayments: You have been accumulating credit card dues over the years resulting in a huge pending payment or it could be that you have missed up on a few EMIs.Due to this your name would have been reported to CIBIL. Banks can reject your loan application due to poor track record of repayments.
3. More loans less income: If you are indulged in too many loans already, then your income minus the ongoing credit repayments will be considered as your actual earning. If banks will not be satisfied with your capability to repay another loan, then your loan will be rejected.
4. Loan guarantee: When you become someone's loan guarantor, you must assure the applicant for whom you are taking up the guarantee. Whether he has the ability to repay the loan without any strain ? Be cautious because if they fail to repay for any reason you will be accountable to repay the loan on their behalf. In such circumstances, if you have been unable to repay their loan, your name will be posted in defaulter's list of CIBIL and hence resulting in bad credit score for you.
5. Co-applicant has a poor CIBIL record: It is important for all the loan applicants to have a good credit repayment record. If you have a clean record but your co-applicant has some bad track record, then your loan application may be rejected.
6. Instability in job: job stability is considered as a benchmark for income generation and thus depicts the borrowers repayment ability. where a reputed company's future appears unstable, the bank can deny the loan.
7. joint loan: Usually joint loan is not preferred by banks when brother sister or friend wants to be co-applicants. However, you can choose to opt for your parents as co-applicants for the loan.
8. Prior rejection of loan application: Once a loan application is rejected, it gets recorded with CIBIL and thus can turn up as an evidence for a bad record ans banks can again reject your loan application.