Personal Loan Denied? This Fix Might Work

Mohit works at an IT company. His monthly income is ₹48,000. He applied for a ₹2 lakh loan and was rejected. The reason? His credit score was below 680. Also, he was using almost 90% of his credit card limit.

He did not apply immediately. He waited three months, followed a few simple steps, and then successfully got a loan of ₹2.5 lakh at a better rate from another lender. You must be wondering how he did that.

Loan rejection can indeed leave you confused and worried. But in most cases, rejection isn't the end. It is just a signal that something needs correction. You can also bounce back from a rejection like Mohit did.

Why Do Personal Loan Applications Get Rejected?

Step-By-Step Fixes That Work In 2025

1. Understand the Exact Reason

You must start by checking the communication from the lender. Most NBFCs and banks mention the reason behind rejection. If the reason is not mentioned then you can speak to the lender’s helpline.

2. Get a Copy of Your Credit Report

Do you know that you can get a free credit report once every year from each credit bureau? You can easily download one from:

 

• CIBIL
• Experian
• CRIF

You should check your score and review your repayment history. If your score is below 700 then you must focus on improving it first before reapplying.

3. Cut Down on Credit Card Usage

Read More -  How to Increase Your Loan Approval Chances
 

You might know that the ratio of your credit utilisation has a strong impact on your credit score. You must try to keep your usage below 30% of your total limit.

Example:

• Total credit limit: ₹1,00,000
• Ideal usage: Below ₹30,000
• If you are using ₹85,000, clear at least ₹55,000 to bring the ratio down.

By doing this you can improve your score by 40 to 60 points in two to three months.

4. Repay Small Loans to Free Up Capacity

Your lender will assess how much of your income is already consumed to repay your loans. This is called the Debt-to-Income (DTI) Ratio.

You should try to keep your DTI less than 30%. So, in this case, repayments should ideally be under ₹13,500.

Tip: If you close a small personal loan or pay off your credit card balance then you can bring this number down and make yourself eligible again.

5. Add a Co-applicant or Guarantor

If you bring in a co-applicant with a steady income or a better credit profile then it can improve your chances.

Also Read - Why Your Personal Loan Application Gets Rejected
 

6. Wait Before Reapplying

You might get tempted to apply right away with another lender. But you should avoid this. It is better for you to wait at least 60 to 90 days after your first rejection, fix the root cause, and then apply.

7. Choose the Right Lending Option

You should not apply blindly. Instead, you should look for lenders whose terms match your profile as different lenders have different eligibility requirements.

8. Consider Pre-approved Offers

If you have maintained a good track record then your bank or wallet app might already be offering you a pre-approved loan. Such loans require minimal paperwork and are often processed within 24 to 48 hours.

9. Correct Documentation Issues

You might be surprised to know that most loan rejections are due to simple errors. You can ensure that:

• Your PAN and Aadhaar match across documents.
  
  
• Your salary slips are up to date.
  
  
• Your employer details are accurate.
  
  
• Your bank statements show consistent income.

10. Use a Loan EMI Calculator

An EMI calculator will help you figure out what monthly payment is comfortable for you. Suppose your salary is ₹40,000 then an EMI under ₹10,000 is within your safe range.

Final Thoughts

If you think that loan rejection is a permanent block then you are wrong. It is just a temporary setback. You can easily reapply in a few months by understanding why it happened and fixing the specific issue like:

• Your credit score
• Your income-to-debt ratio
• Your documentation

You do not need to rush. Just simply clean up your finances, prepare better, and apply smarter. With a few smart moves, a little patience, and the right lender you can turn a loan rejection into an approval.

FAQs

1. Do fintech lenders check credit scores?

Yes, though some consider alternative data too.

2. Are pre-approved loans better?

Yes, they are faster. Also, they have fewer conditions.

3. Can documentation errors cause rejection?

Yes. Even minor mismatches can lead to rejections.

4. When is it safe to reapply for a loan?

After at least two months of making improvements.