Personal loans can provide a financial boost that can help you achieve a number of goals. However, it’s important to remember that not all loan applications will be successful.
To help you gain a better chance of getting your personal loan application approved, take note of these eight typical reasons that could cause your a bank to give you the thumbs down instead of up.
#1 A Low Salary
Your salary plays a crucial role in your application. Banks will consider it a red flag if they determine that you would not be able to keep up with your monthly repayments.
Most loans in the UAE will require the applicant to have a minimum monthly salary of AED 5,000 but there are also some lenders that require at least AED 3,000 for a loan applicant’s monthly salary.
#2 Your Employer and Their Standing
Most banks and lending institutions ask for proof of your employer and employment history because they must know about your job’s stability.
For instance, your employer must be included on their companies approved list and you must be done with your employee probation period. If you are still on probation or your employer isn’t known to the bank, your loan may not be approved.
#3 Existing Debts
Banks prefer that you have no outstanding debts with other providers. If you do have debt, this will make you a higher risk to them because you have different lenders to pay.
#4 High Debt to Burden Ratio
According to the UAE Central Bank, any existing monthly debt payment must not exceed more than half of your monthly salary. This is known as your debt-to-burden ratio. And if this goes above the threshold of 50 percent, your loan application will surely be rejected.
#5 Incorrect or Missing Personal Details
This is one of the most common errors people make when applying for a personal loan. You must ensure that all the details you have entered in your application form are correct and accurate. Once the bank finds inconsistencies, they will most likely reject your application.
When you apply for a loan, the lender will contact you to confirm who you are. They will also be asking for more important details. When giving any kind of information, you should always be truthful or your loan application will get rejected.
#6 Below Minimum or Above Maximum Age
Most banks in the UAE require applicants to be over 21 years old and under 65 at the point of your loan reaching maturity. When you are younger or older than these basic age limits, your application will not be approved.
#7 Lack of Credit History
If you have been in the UAE for no more than two years, you will not be likely to have a significant credit history. Most lenders will check the background of your credit history.
If you do not have any credit history or if you have a few negating listings on your file, your application may be rejected. Although credit history is not yet considered a crucial factor that may cause lenders to reject your loan, this could still be counted against you.
#8 Being Ill-prepared to Make a Salary Transfer
Few UAE banks will issue a loan without asking that you transfer your salary. A salary transfer will allow the bank to deduct your monthly repayments automatically from your bank account once it is credited. This will provide extra security for the lender if you suddenly become unemployed. The bank can freeze the service benefits on your end.
So if you are not yet prepared to transfer your salary and you do not have a stable relationship with the lender yet, you may not be granted a loan.
It is never satisfying to be told no, most especially when this comes from a bank or lending institution declining the application for a loan that could resolve your financial needs. Remember, however, that you can always work on becoming a more attractive candidate for a loan.
By taking a step back, you can find a solution. If successfully securing a loan is still too challenging to achieve, consider evaluating your personal finances and asking the best banks and lending institutions for further advice and assistance.