What can lower your chances of getting a personal loan approved

Factors lowering personal loan approval

Your credit score is the first thing lenders check before approving a personal loan. A score below 750 can make banks see you as a higher-risk borrower. Late payments, defaults, or maxing out your credit cards can all pull your score down. It’s wise to review your credit report regularly and clear any small dues that could hurt your record.

High existing debt reduces your eligibility

If you already have ongoing EMIs — whether for a car, home, or credit card — lenders will see your repayment capacity as limited. Most prefer your total EMIs to stay under 40–50% of your monthly income. Closing smaller loans, consolidating debt, or increasing your income documentation can help you qualify for a higher loan amount.

Unstable employment or frequent job changes

Banks and NBFCs look for employment stability when assessing a borrower’s ability to repay. Switching jobs too often or having long breaks in employment can make you appear unreliable. Ideally, lenders like to see at least six months to a year of continuous employment with the same employer before approving a personal loan.

Low or inconsistent income

Your income level directly impacts how much you can borrow. If your salary fluctuates or is below the minimum threshold for the lender’s policy, your eligibility will drop. In such cases, showing additional income sources — like rent, freelancing, or spouse’s income — can strengthen your application.

Too many recent loan applications

Every time you apply for credit, lenders make a “hard inquiry” on your report, which can slightly reduce your credit score. Multiple applications within a short span make you look credit-hungry. Instead, compare rates through loan aggregators and apply with one or two preferred lenders only after checking your pre-approved offers.

The takeaway

Getting a personal loan approved isn’t just about income; it’s about credibility and financial discipline. Keeping your credit score healthy, managing existing EMIs smartly, and avoiding multiple credit requests can make approval smoother and even help you get better interest rates.