When it comes to your emergency needs, no doubt that personal loans can be your easiest ally. The main reason is it has an easy and fast transaction that can immediately secure your travel, home renovation, health, and other needs.

However, some applicants may also face rejections due to some circumstances, and if you’re planning to apply for a personal loan, see below rejection reasons that you would like to assess:

1. Low Credit Score

A credit score is like a scoreboard that serves as a basis of financial institutions such as banks, credit cards, and lending companies. It is composed of three-digit numbers determining your capability to manage debt. This indicates all the details like the date you opened your bank account, how many loans you have applied for, how many you have paid, or if you have any current or outstanding balances. 

This is not only used on the loan applications but is also significant in insurance rates and employment opportunities.

Although there’s still no centralized credit reporting in the Philippines, you should at least have an idea on your credit score (especially if you have applied previously) to prevent rejection of your loans.

If you aren’t sure about your standing, you can visit the CIC or Credit Information Corporation, a government-owned and controlled corporation providing credit info.

2. Low Income

Your income also affects the probability of your loan approval. Every financial institution has loan brackets.

If your income- is lower than the criteria, then the chances of your rejection will be higher. These companies usually depend on the monthly EMI or Equated Monthly Installment or the fixed minimum amount that shall be paid by the borrower in a month. This already includes the principal amount and the interest to ensure that you can fully pay the loan on the x number of years.

If you have a lower income than the EMI, then the financial institution will have lesser confidence in your capability to pay.

3. Unstable Job

Similar to the low income, instability of a job can also be one of the rejection reasons. Lenders value your job tenure to ensure that you can pay the EMI or the entire loan. 

If you have been job-hopping every six months or less, the probability of your rejection would be high. As of now, lending companies commonly require at least a year in your current job/company or at least a minimum of two working straight years.

4. Inaccurate or Insufficient Information

Simple it may sound but yes, inaccurate information can truly lead to loan rejection. Personal loans, especially cash loans, usually have minimal requirements such as proof of identity and income proof, that’s why you need to make sure that all of these are true, correct, and updated. 

Make sure to double-check all of the details before submission and also stay alert whenever the lender starts to verify your data may it be through email or phone call.

5. There are Too Many Pending Loans/ Too Much Debt

Financial institutions have access to your credit score. If they have noticed that you have too many pending loans and assess the reasons for rejection, then your application may probably be denied.

Also, if you are currently in knee-deep of debt, it would be harder to earn their trust.

What you can do? Make sure to keep your debt-to-income ratio low. The debt-to-income ratio is a comparison of an individual’s monthly debt to their monthly gross income. On average, you should have at least a 12 % debt-to-income ratio or lower. Divide your overall monthly debt by your gross monthly income. If you think it’s higher, then you will have an idea of whether your application will be approved or you may consider postponing your loan application.

6. Too Many Applications/ Rejections

Similar to the latter, plenty of applications or rejections may also cause you trouble. The lender might think and further assess whether you will still be capable to pay the loans in case you will be approved or not, that’s why you should at least assess your capabilities; you can apply for a loan one at a time or at least compute it.  

How Can Pahiram Help?

Pahiram is a local financing company offering short term financial solutions to individuals and SMEs (Small Medium Enterprise). We have an interest rate as low as 5% to ensure that it won’t leave you with a burden.

We have also minimal requirements and we ensure to communicate very well with our clients to easily settle issues or any concerns.

We are transparent with your application so whether you need cash for your immediate needs you can always count on us. Visit our page and know more about our offer.

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