Applying for a loan, whether for a home, car, vacation, or emergency expenses, has become common these days. However, banks are cautious when approving loans, considering factors like your credit history, income, and repayment capacity. If your loan applications are repeatedly rejected, don’t lose hope. A few small changes can significantly improve your chances of approval.

1. Strengthen Your Credit Score

Banks first check your CIBIL score, which reflects your creditworthiness. In India, a score of 750 or above is considered ideal. A high score increases the likelihood of approval and can also help you get a lower interest rate.

To improve your score:

• Pay old EMIs and credit card bills on time.

• Keep credit utilization below 30%.

• Avoid unnecessary credit inquiries.

• Regularly monitor and correct errors in your credit report.

2. Reduce Existing Debt

Having multiple loans or active credit card EMIs can reduce your repayment capacity, measured by the Debt-to-Income (DTI) ratio, which ideally should be below 40%.

Ways to improve this ratio:

• Pay off smaller loans.

• Clear outstanding credit card balances.

• Lowering your DTI reassures banks that you can handle a new loan.

3. Provide Complete and Accurate Information

Incomplete or incorrect documents are a common reason for rejection. Ensure all documents like PAN, Aadhaar, salary slips, bank statements, and income proof are correct and up-to-date.

• Double-check for spelling mistakes or mismatched addresses.

• Submit all required documents together to avoid delays or rejection.

4. Show Stable Employment and Income

Banks prefer borrowers with stable jobs and regular income. Frequently changing jobs or irregular income can lead to rejection.

Tips for improving approval chances:

• Stay in the same job for at least 1-2 years.

• Self-employed applicants should provide strong ITR, business proof, and income statements.

• Highlight additional income sources such as bonuses or investments.

5. Avoid Applying for Multiple Loans at Once

Submitting multiple loan applications simultaneously triggers multiple hard inquiries, which can lower your credit score. It may also signal desperation to banks.

Best practices:

• Check eligibility and pre-approved offers first.

• Apply only with one or two trusted lenders.

• If rejected, wait 3-6 months to improve your score before reapplying.