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10 reasons why your personal loan failed
Read here why my personal loan failed due to a few factors. My credit score wasn’t strong enough, my debt-to-income ratio was too high, and there were a few pieces of inaccurate information on my credit report that negatively impacted the outcome.
10 reasons why your personal loan failed Summary
- Article Name: 10 reasons why your personal loan failed.
- Purpose: General info about why your personal loan failed
What are 10 reasons why your personal loan failed
There are the reasons why your personal loan failed include:
- Poor credit score
- Low income
- Inadequate financial documentation
- Too many existing loan commitments
- Too many enquiries on your credit report
- Wrong or incorrect information on your loan application
- Negative credit history
- Unstable employment
- Insufficient security
- High LVR (loan to value ratio).
What is poor credit score on personal loan in Malaysia?
A poor credit score for a personal loan in Malaysia is typically considered to be anything below 550 on the CIBIL scoring scale. In general, lenders consider applicants with a credit score below 550 to be high-risk borrowers and lenders may reject loan applications from individuals with such low scores.
What is poor credit score on personal loan?
A poor credit score for a personal loan is typically considered anything below 680 on the FICO scale. Most lenders will be unwilling to offer a personal loan to borrowers with a credit score of less than 680, and those who do may offer a financing with a higher interest rate or other unfavorable terms.
A credit score below 580 is generally considered to be poor credit and may affect your eligibility for receiving a personal loan. Although it is possible to obtain a financing with lower credit, you may be subject to higher fees and/or interest rates than what is offered for individuals with good credit.
Poor Credit Score
The first and foremost reason why your personal loan failed is due to your poor credit score. This means that you haven’t been able to pay bills on time and manage your debts efficiently. Lenders normally use credit scores to decide whether or not they should grant you a loan. Most lenders prefer borrowers who have a good credit score of 700 or more. Since your credit score was poor, you were considered a high-risk borrower and the lender might have thought that you are not a responsible borrower and hence, you were rejected.
Low Income affecting your personal loan application
Your income also had a major impact on the decision of the lender. The lower your income is, the less likely you are to be in a position to pay back the loan. Also, most lending institutions have a minimum income requirement that borrowers should meet before their application can be considered. If your income does not meet the required amount, the lender will automatically reject your application.
Inadequate Financial Documentation
Another reason why your personal loa application failed is because you didn’t submit all the necessary financial documents. Financial documentation includes bank statements, pay slips, tax returns and other financial evidence that can prove that you can afford to repay the loan on time. If you don’t provide all the required documents, the lender will not be able to assess your capability to repay the loan.
Too Many Existing Loan Commitment
- Another factor that could have contributed to your personal loan not getting approved is the fact that you had too many existing loan commitments.
- If you already owe a lot of money to various lenders, it could be a sign that you are over-leveraged and don’t have enough money to take on more debt.
Too Many Enquiries on Your Credit Report
- If you have made too many loan applications in the past, it could have an effect on your credit score. Each time you make an enquiry on your credit report, this affects your credit score negatively.
- Too many enquiries may indicate that you are desperate for credit and this can be a red flag for lenders.
Wrong or Incorrect Information on Your Loan Application
- Providing incorrect or wrong information on your loan application can severely hamper your chances of getting approved. Lenders go through your application carefully and if they find any discrepancies between what you have written in the application and what is present in your documents, this could lead to rejection.
- It is important to provide correct information when applying for a loan to avoid any complications.
Negative Credit History
If you have a poor credit history, it can be a huge factor when it comes to getting approved for a loan. A negative credit history can be seen as a sign that you have a bad track record of not following your financial commitments. Having a bad credit score could mean that you will be seen as a high-risk borrower and the lender might not want to take that risk by providing you a loan.
Unstable Employment
Your job stability is another important factor when it comes to getting approved for a personal loan. Lenders want to know that you will be able to repay the personal loan on time and that can be hard if your job is not stable. If your job is not secure or you are in a temporary role, the lender might not want to take the risk of providing you with a loan.
Insufficient Security
Sometimes, lenders will require some form of security for the loan. This means that you will have to provide some asset which the lender can use to cover the loan in case of non-payment. If you don’t have the sufficient collateral needed to meet the lending criteria, it can be a reason for loan application failure.
High LVR (loan-to-value ratio)
A high loan-to-value ratio (LVR) means that you are asking for a loan amount that is more than the value of the asset that you are offering as security for the loan. This can be seen as a risky situation for the lender and they may be more inclined to reject the loan.
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