Cash woes? A personal loan to the rescue!

    How to avoid personal loan rejection?

    Personal loans are especially useful when you need cash for a medical emergency, to finance a wedding or pay up your credit card debts. There is never a full proof method to know if your personal loan application will be approved or not. But every rejection affects your credit score and is a red flag for the next bank you approach.

    Your personal loan may be rejected for a number of reasons. Some of them are:

    • Your credit history is marred because you have defaulted on payments or have paid your debts past their due date. Your credit rating could also take a beating if you apply for too many loans within a short span.
    • You may not meet the income requirements that are set by the bank to disburse a loan.
    • Personal loans can be used for a number of reasons, however, most banks do place restrictions on what the money can be used for. So, if the purpose behind your loan is dubious, your bank will reject your application.
    • If there are inconsistencies in the details that you have provided your bank, then you will not be allowed to borrow funds.
    • While verifying your application, if your bank finds out that your job isn’t stable or that there is insufficient employment history, then your loan application can be rejected.
    • Holding too many loans at the time of application could also prevent banks from lending you money.
    • If you are applying for a secured loan, then the collateral that you provide may be too low. This could prompt your bank to reject your application.

    The big question is, how do you avoid your loan from being rejected then? There are a few simple steps that you can follow to try and ensure that your bank lends you the requested funds.

      1. Check your credit score

      Your credit score will determine if a bank is willing to let you take out a loan. A good credit score is always better than a poor one. To improve your credit score, ensure that your outstanding debts are all paid up. Once this is done wait for at least a month before you apply for a personal loan.

      2. Avoid too many applications

      Every time you apply for a loan, the creditor lists it in your credit file. Multiple applications within a short period of time can raise suspicions and have an adverse impact on your all-important credit rating.

      3. Have your documents in place

      Sometimes banks may reject your loan application if the requested documents are not provided on time. Documents like your payslips and Tax Assessment Notices are needed by the bank to approve and process your loan. Also, ensure that your application form is filled in full and all details are verified. Insufficient or inaccurate details could lead to automatic rejection of your application.

      4. Check income requirements

      All personal loans in Singapore have minimum income requirements as part of their eligibility criteria. Depending on the type of loan you are considering taking, the income requirements may differ. In general, in order to be eligible for a personal loan, you need to have a minimum income of S$20,000 and upwards per year if you are a Singapore Citizen or a Permanent Resident. For foreign nationals, the annual income requirement is S$40,000 and upwards. Apply for this loan only if you meet this income requirement since rejection could affect your credit score.

      5. Don’t hold too many loans

      If you have more loans than you can afford to repay, lenders are less likely to let you borrow funds from them. One way to prevent your application for a personal loan from being rejected is to consolidate your borrowings by repaying a few loans in full. This way you will have fewer loans against your name when you apply for a new one.

      6. Check on employment requirements

      Some banks may require that you be in employment for a minimum period of time before they consider your loan application. Ensure that you check with the bank on how many months of service is needed so that your application is not rejected on these grounds.

      7. Your loan purpose

      As mentioned earlier, banks will refuse to lend funds for any dubious reasons. Moreover, secured personal loans have certain restrictions on what the borrowed amount can be used for. Check with your borrower if you can use the funds for your purpose before you apply. This will reduce your chances of rejection. At times, you may find specialised loans that offer better benefits than personal loans do. For instance, taking out a car loan to buy a car or an education loan to finance your university expenses makes more sense than taking out a personal loan for the same purpose.

      8. See that you have sufficient collateral

      If you are taking out a secured loan, then first check with your banker if the assets you want to pledge are permissible. Also, check with them on the collateral amount that you need to provide. This way you can see if you have sufficient amounts or the right type of collateral.

      As with all purchases, it is imperative that you do your research before taking out a personal loan. Banks won’t lend amounts that they know you can’t afford. So, ensure that you are realistic when it comes to both picking a bank for your loan purposes, loan quantum as well as your financial standing. The chances of your personal loan being rejected will reduce if these are kept in mind.

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