Learn the common reasons your loan application is rejected and discover practical ways to avoid them and increase your chances of loan approval.
When faced with urgent needs, applying for a loan can be the main choice. However, it is not uncommon for loan applications to be rejected even though you have met various basic requirements.
Learn 10 common reasons why your loan application can be rejected and how you can avoid them to increase your chances of approval.
1. Bad Credit History
A bad credit history is one of the main reasons why a loan application can be rejected. Banks and lending institutions use data from Bank Indonesia (BI) to check the loan history of prospective borrowers.
If you have a poor payment record or even outstanding debts, this can reduce the lender’s confidence.
Before applying for a loan, make sure all your financial obligations are settled, and if possible, pay off any outstanding debts first to improve your credit history, especially if you are considering Fast Liquid Loans.
2. Incomplete or unclear requirement files
Incomplete or unclear documents are another factor that can cause your loan application to be rejected. Lenders need complete and accurate information to assess your eligibility to borrow funds. Vague or incomplete documents can delay or even fail a loan application.
Before applying, check the completeness and clarity of all required documents. Make sure photos of documents such as KTP, NPWP, and pay slips are clear and easy to read.
3. Loan amount exceeds the limit
Loans that exceed the limit set by the lending institution may be at risk of being rejected. Unlike loans at banks, fintech platforms or online lenders usually set lower limits that suit your financial capacity. If you apply for too large a loan amount, this may make the lender concerned about your ability to repay.
First, check the maximum loan limit offered by the lending institution and adjust the amount you apply for to your financial capacity. Don’t apply for a loan beyond your means.
4. Unstable Job or Income
Unstable employment or an unstable income can be a consideration for lenders. They are more likely to approve loans from people who have a stable job and a steady income, as this indicates that you will be able to repay the loan on time.
For freelancers or entrepreneurs, unclear or fluctuating proof of income can result in a loan application being rejected.
If you are a freelancer or entrepreneur, include clear financial evidence such as tax returns or consistent monthly income to convince lenders that you have reliable income.
5. Data Forgery
Falsification of data, such as listing a name that does not match the data on the account or using a spouse’s data to apply for a loan, can result in a loan application being rejected. This is considered a potential risk of fraud, leading to the rejection of the loan application.
Always make sure the information you provide matches your official data. Avoid using inappropriate information or trying to manipulate data for personal gain.
6. Failed Verification
Failed verification usually occurs due to inaccurate information provided when filling out the loan application form. For example, an incorrect phone number or a blurry photo of yourself can hinder the verification process.
Lenders need to ensure that the data you provide is valid, and if they fail to contact you or the data cannot be verified, your application will be rejected.
Make sure all the information you fill in the application form is correct and complete. Check your phone number and make sure your photo is clearly visible and can be easily verified by the lender.
7. Condition of the Financial Institution Itself
Not only the prospective borrower, the financial condition of the financial institution also influences whether the loan can be approved. If the institution experiences financial difficulties, they may decide to limit or suspend loan approvals to avoid further risk.
Choose a loan provider institution that has a good reputation and stable finances. Additionally, be sure to check reviews or do research on the institution’s conditions before applying for a loan.
8. Your domicile is outside the service coverage area
Some lending platforms have geographical limitations to their service reach. If you live in an area that is not served by the loan provider, your loan application may be rejected.
Before applying for a loan, make sure the platform you choose serves the area where you live. Check whether your area is included in the targeted area by the loan service provider.
9. Number Cannot Be Reached
An unreachable or inactive phone number can cause your loan application to fail. Lenders often contact you by phone for data verification before proceeding to the approval stage. If they cannot reach you, they may reject your application.
Make sure the telephone number you listed is active and can be contacted. Additionally, if possible, provide an alternative contact number to ensure your application still has a chance of being accepted.
10. Unclear Use of Funds
Lenders often ask for an explanation regarding the purpose of the funds. If you cannot provide a clear reason or if the use of the funds is considered risky, your loan application may be rejected.
Before applying for a loan, make sure you have a clear and detailed purpose for using the funds. For example, explain that the funds will be used for home renovations, business capital, or education costs, which are more easily accepted by the bank or loan provider.
Applying for a loan is not always smooth sailing, and there are many reasons why your application may be rejected.
However, by ensuring that you have a good credit history, filling out your data carefully, and providing clear proof of income, you can reduce the chances of rejection, especially when applying for Low Interest Loans.
Always make sure to follow the procedure carefully, and ensure that all information provided is accurate and in accordance with your official documents. This way, the chances of getting your loan approved will increase significantly.