Published: July 3, 2019 | Updated: September 23, 2020 | Posted by: Venus Zoleta | Personal Loan
Rejection of any kind is hard to accept—more so if it involves money. Case in point: getting your personal loan application denied. Your time and effort spent preparing your requirements and waiting anxiously for the loan approval all just went to waste. It makes you want to demand an explanation from the bank, lashing out like that memorable scene from that one movie starring Piolo Pascual.
But no need to go berserk to try and reverse the bank’s decision. Cooler heads always prevail, so try to find out why they rejected your application and correct the problem. Personal loan providers in the Philippines base their credit decisions on a borrower’s financial information and their assessments from credit investigations and background checks. If you received a no from a personal loan provider, it’s likely due to the following reasons.
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It doesn’t matter if you have enough money on your account. Banks will reject your personal loan application if your income can’t sustain the monthly loan repayment. They always require borrowers to meet a minimum annual or monthly income requirement. Before you sign that application form, check the minimum income requirement of the lender where you filed your loan application. In case you forgot to check the requirements before applying, do it now and see if your income documents matched the bank’s criteria.
For example, to qualify for a BDO personal loan, you need an annual income of at least PHP 400,000 (self-employed) or PHP 120,000 (employed). For BPI personal loans, they require self-employed applicants to have a monthly income of PHP 50,000 (PHP 600,000 annually) and employed applicants to earn PHP 25,000 monthly (PHP 300,000 annually). Meanwhile, to qualify for a Citibank personal loan, you’ll need an annual income of PHP 250,000 (PHP 20,833 monthly).
Meeting the bank’s income requirement alone doesn’t guarantee an approval. Banks and lenders also require a minimum employment tenure or length of service. They need an assurance that borrowers can sustain their loan repayments during the entire loan term. Obviously, an unstable job or a dodgy employment record doesn’t really help your case as a responsible borrower. Most banks require applicants to be employed for at least one year. So do your best to maintain a job or a steady source of income and try applying again.
Simply put: you asked for too much that’s why they rejected you. The number you provided in the “desired loan amount” field of your personal loan application could be the culprit of your loan rejection. You might have asked for an amount that’s too high compared to what you could actually pay back. Avoid this mistake the next time you apply for a personal loan. Use an online loan calculator to check how much you can realistically borrow based on your income. Try and apply for a lower amount on your next try, even if you’re qualified for a higher one.
A good credit standing is critical to a successful personal loan application. Many borrowers with high salaries and stable jobs get the shock of their lives when banks decline their loan applications. What they don’t realize is that other factors greatly affect their chances of getting approved for a loan. Banks will look at your credit history and credit score to determine if you’re worth lending money to. Your credit score, in particular, reflects your past behaviors as a borrower, like loan defaults and maxed out credit cards.
In some cases, errors in credit reports cause a borrower’s credit score to drop. For example, loan payments could be incorrectly reported as late, or closed credit card or loan accounts still show up as open. So if the bank rejected your loan application, check your credit score and credit report for errors. It’s important to clear your bad records to improve your chances of personal loan approval in the future.
If you’re currently knee-deep in any type of debt, it’s best not to apply for a personal loan to begin with. Once your bank finds out that your debt is too high relative to your income, consider your application denied. Keep your debt-to-income ratio low (12% or lower) to avoid a rejection from the bank. To compute it, divide your monthly debt (outstanding credit card and loan balances) by your gross monthly income. If it’s too high, consider postponing your personal loan application until you’ve paid off at least a portion of your debt.
Who knew a simple mistake on your application form can ruin your chances of a loan approval? That’s why it’s important to double-check every detail you submit. Lenders need to ensure consistency and completeness of personal and financial information from borrowers. If they can’t verify your data, the processing of your personal loan will be delayed or result in a rejection. Also, stay alert for follow-up calls from the bank for verification of your data. This way, you avoid seeing another rejected stamp on your application.
Did you read the eligibility requirements from the bank you’re trying to loan from? They probably rejected your application because you failed to meet some specific requirements. Some lenders have unique requirements for their personal loan products. For instance, before you apply for a personal loan with Citibank, you need to have a Citi credit card for at least six months or any card from other banks for at least a year. When you apply for a BDO or BPI personal loan, your home should be near a bank branch.
Getting your personal loan rejected can get rather frustrating. But take the rejection as a learning opportunity to make your financial habits better, regardless of the reason. Improve your credit score, pay off your debts, and do anything you can to prove you’re a responsible borrower. And when you’re ready to file another personal loan application, make sure you meet all eligibility requirements and submit all supporting documents. A rejected loan doesn’t mean you can’t ever apply for a loan anymore. You can always try again some time.
Venus is the Head of Content at Moneymax, with 15+ years of experience in digital marketing, corporate communications, PR, and journalism. She invests in stocks, mutual funds, VUL, and Pag-IBIG MP2. Outside of work, she’s crazy about cats and Korean dramas. Follow Venus on LinkedIn.