Personal loan rejected? Here's what to do next and how to improve your chances

A rejected personal loan can derail your financial plans, especially when you’re in urgent need of funds. But more often than not, loan denials stem from issues you can fix — be it a low CIBIL score, high debt, or missing paperwork. Knowing what went wrong and how to correct it can dramatically boost your approval odds the next time you apply.

Lenders turn down applications for several reasons, and understanding them is the first step toward fixing them:

• Low CIBIL score: A score below 750 often signals poor credit history, making lenders hesitant.
• High debt-to-income ratio: If too much of your income goes toward existing loans, your repayment capacity is in doubt.
• Unstable income or employment: Lenders favor borrowers with steady jobs or consistent income.
• Multiple loan applications: Applying for several loans in a short time can make you appear credit-hungry.
• Incomplete documentation: Missing essentials like ID proof, salary slips, or bank statements can lead to instant rejection.

Fixing a low CIBIL score

If your loan was rejected due to a credit score issue, here’s how to bounce back:

• Pay EMIs and credit card bills on time.
• Keep credit utilisation below 30%.
• Avoid frequent loan applications.
• Clear existing debts to boost your creditworthiness.
• Check your credit report for errors and dispute them if needed.

What to do after a rejection

Rejections aren't the end — they're a sign to recalibrate. Here are steps to get back on track:

• Understand the reason: Contact the lender to clarify why your application was turned down.
• Apply for a lower loan amount: Smaller amounts are less risky for lenders.
• Add a co-applicant or guarantor: A financially strong co-signer can tip the scales in your favor.
• Explore NBFCs and fintech lenders: These often have more relaxed credit score requirements than traditional banks.
• Consider a secured loan: Backing your loan with assets can ease approval and reduce interest rates.
• Wait and reapply: If you've worked on your credit or income, wait a few months before trying again.

Improve your eligibility before applying

A strong credit score (preferably 685 or above), steady income, and a clear debt record all work in your favour. To further improve your chances:

• Use a personal loan eligibility calculator: Estimate your potential loan amount and avoid unnecessary rejections.
• Ensure stable employment: Six months in your current job or consistent earnings if self-employed strengthens your profile.

Taking these steps not only increases your odds of approval but also helps you qualify for better interest rates and higher loan amounts.