YOU ARE HERE:HomeNewsBusinessPersonal Finance Personal loan KYC rejected? Your essential guide to avoid KYC verification failure
Personal loan KYC rejected? Your essential guide to avoid KYC verification failure
21 April, 2025 | 12:42 IST
While applying for a personal loan, one of the first hurdles you will face is KYC (Know Your Customer) verification. It is the process lenders use to confirm your identity and financial background before approving your loan. It helps prevent fraud, money laundering and financial crimes by ensuring that the person applying for a loan, opening a bank account, or making financial transactions is genuine. Applicants may also face KYC rejection, which can delay or even prevent loan approval.
Here are some reasons for KYC rejection, common mistakes people make, and simple ways to fix or avoid them:
Incorrect or incomplete documents
One of the most common reasons for KYC rejection is submitting incorrect or incomplete documents. Financial institutions require specific documents for verification, and any discrepancy can lead to rejection.
Common mistakes:
Submitting expired identity or address proof (like an outdated Aadhaar card or passport).
Uploading blurred or illegible scanned copies.
Providing documents with mismatched details (example - name mismatch between PAN and Aadhaar).
Missing mandatory documents such as salary slips or bank statements.
How to avoid:
Double-check that all documents are valid and up to date.
Ensure scanned copies are clear and readable.
Cross-verify that the name and address match across all documents.
Personal details don’t match
A mismatch in personal details can also lead to KYC rejection. Lenders compare details across documents, and any inconsistency raises red flags.
Common mistakes:
Different spellings of names in PAN, Aadhaar and bank records.
Discrepancy in date of birth or address.
Using nicknames instead of full legal names.
How to avoid:
Always use the name and details as per official government records.
Update documents if there is any mismatch before applying for a loan.
If your name has changed due to marriage or any legal reason, update all relevant records.
Issues with proof of address
Address proof is a key part of KYC verification. If your provided address does not match official records, the lender might reject your application.
Common mistakes:
Using an outdated address proof.
The address in the bank statement or utility bill does not match Aadhaar or PAN.
Submitting temporary rental addresses without proper proof.
How to avoid:
Make sure your Aadhaar, passport, or voter ID has your current address.
If you have recently moved, update your address with your bank and government authorities.
Use valid address proofs like electricity bills, bank statements, or rental agreements if applicable.
Low credit score
While KYC is mainly about identity verification, some lenders also check credit scores during this stage. A poor financial history can lead to rejection.
Common mistakes:
Having a low CIBIL score due to missed payments.
Too many existing loans or high credit utilisation.
Previous loan defaults or late payments
How to avoid:
Regularly check and maintain a good credit score (700+ preferably).
Clear outstanding dues before applying for a new loan.
Reduce dependency on multiple loans and credit cards.
Issues with PAN or Aadhaar linking
Many lenders require PAN and Aadhaar details to be linked for KYC verification. If there’s an issue with linking, your application may get rejected.
Common mistakes:
PAN and Aadhaar are not linked, causing verification failure.
Name mismatch between PAN and Aadhaar.
Submitting a duplicate or fake Aadhaar/PAN card
How to avoid:
Ensure your PAN and Aadhaar are linked before applying for a loan.
Verify that your name and date of birth are consistent across both documents.
Use only government-issued documents and avoid third-party generated IDs.
Bank account and mobile number not linked to Aadhaar
Lenders often send an OTP (One-Time Password) to verify the mobile number linked to Aadhaar. If your Aadhaar-linked mobile number is inactive, the KYC process may fail.
Common mistakes:
Using a different mobile number than the one registered with the Aadhaar card.
Providing a bank account not linked to Aadhaar.
Entering an incorrect OTP during online verification.
How to avoid:
Update your mobile number with Aadhaar if it has changed.
Make sure the bank account provided is Aadhaar-linked.
Enter the OTP carefully and within the given time frame.
Suspicious or fraudulent activities
If lenders suspect fraud or identity theft, they may reject the KYC application.
Red flags for lenders:
Multiple applications using different details.
Submitting fake or forged documents.
Using an identity that does not match past records.
How to avoid:
Always provide genuine and valid documents.
Avoid multiple applications with inconsistent details.
If your identity has been misused before, report it to authorities and update your records.
Income or employment-related issues
For personal loans, lenders verify not only identity but also income stability. If your employment details do not match their records, KYC can be rejected.
Common mistakes:
Providing incorrect employer details.
Salary slips not matching bank statements.
Freelancers or self-employed individuals not providing proper income proof.
How to avoid:
Make sure your salary details are correctly documented.
Provide accurate employer information.
Self-employed applicants should submit proper income tax returns or bank statements.
Personal loan KYC rejection could be frustrating but is usually avoidable. Ensure all documents are correct, updated and consistent for smooth approval. If rejected, identify the issue, fix it and reapply.
Through Moneycontrol’s online lending platform, you can get personal loans up to ₹50 lakhs from eight lenders, with interest rates starting at 10.5% per annum. The process is 100% digital.
KYC rejection is one of the most common roadblocks in getting a personal loan approved. Learn the key mistakes to avoid and how to fix them for a smoother loan journey.
Disclaimer
This piece/article was written by an external partner and does not reflect the work of Moneycontrol's editorial team. It may include references to products and services offered by Moneycontrol.
100% Digital
Quick Disbursal
Low Interest Rates
