8 Strange Reasons You May Be Denied A Loan Or Credit Card


Applying for a loan or credit card has become easy due to hassle-free online processes, but a single mistake can land you in a huge financial crisis. Lack of awareness while applying for the loan or credit card can lead you to a debt trap which, in turn, may severely affect the future of you and your family. Hence, you must be aware of all the reasons that might lead to rejection of your application.


Here are the 8 strange reasons that might lead to rejection of your loan or credit card application:  

1. Insufficient or poor credit history: Lenders always refer to your Credit Information Report before approving your loan application. If you have not paid your credit card bills or EMIs on time, it will show up on your credit report and may result in your loan application being rejected. A score above 650 is suitable and makes you eligible for loans and credit cards. Hence, it’s always advisable to check your credit score before applying for a loan or a credit card.

2. Unstable jobs: Inconsistent work history could land you in trouble when applying for a loan or credit card. You should have 2 years of total work experience with a minimum tenure of 6 months with your present employer. Switching jobs on a frequent basis may not be very well received by your lender. Same is applicable to your residential address. You must not shift from place to place on a frequent basis as it creates a negative impression on the minds of the lender.

3. Low-income: You must have a regular source of income in order to apply for a loan or credit card. Your application could get rejected if you do not meet the minimum income criteria set by the bank you wish to apply with. Even the co-borrower, whose income is considered for loan eligibility, has to meet the income requirements.

4. Minimum age criteria: The minimum age required for availing a loan or credit card is 18 years. However, the applicants who are more than 18 years old can also be denied a loan or credit card if they do not meet the income criteria or have a poor credit score. Banks demand income proofs and a good credit score before approving the loan.

5. Too many EMIs or multiple cards: If you already have multiple loans running and the total EMIs you pay is more than 50% of your monthly income, you risk being denied a loan or credit card. While there is no defined maximum number of cards that one person can own, most banks might not be willing to issue new cards if you already have a significantly large number of existing cards.

6. Poor banking: Apart from income documents, banks also review your bank statements to understand your banking behavior. If the crediting of your salary is untimely or inconsistent, then there are chances that your loan application might get rejected. For both salaried and self-employed individuals, it is mandatory to provide bank account statements of the last six months. There should be no minimum balance charges or cheque bounces in your statement.

7. Negative field investigation or physical verification: Before sanctioning a loan, the lender will initiate the physical verification of your home and workplace. Through this process, they will confirm your stability and standard of living. Your application might get rejected if there is a discrepancy in what you’ve stated on your application against what they see physically. For example: incorrect work address or home address.
      
8. Property-specific rejection reasons:

a) Property valuation: Banks or other financial institutions always do the valuation of the property – checks for the property value, the age of the property, locality and area of the property. Banks also avoid funding against the property that is more than 20-25 years old. In such cases, you may be asked to offer additional property as security to mitigate the risk.

If your property is not located within the permissible limits or is unsaleable due to any reason, then the bank may reject your mortgage loan.

b) Legal or Title Verification: You must provide the complete chain of titles or property documents before you get the approval of your mortgage loan.

Now that you are aware of all the reasons for rejection of your loan application or credit card, you may want to be diligent and wise about your choices.

Related topic: Which Credit Card Reward Program is Best for you

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