7 Reasons Why Your Personal Loan Application Is Rejected (2024)

It’s not easy to hear a “no” after putting in so much effort into your personal loan application. You probably feel frustrated and disappointed. But don’t worry, you’re not alone. There are many people who face the same situation.

By now, you’re probably asking yourself what are the reasons why personal loan rejected in Singapore.

Learning the reasons why your personal loan application was rejected can not only help you understand where you went wrong, but also gives you the opportunity to turn your mistakes around.

Ready to find out why personal loan rejected in Singapore? Keep on reading.

• Why Personal Loan Rejected in Singapore: 7 Common Reasons
  • You don’t meet eligibility requirements
  • You have a low credit score and credit history
  • You don’t have a stable job
  • You have a high debt to income ratio
  • You borrowed too much
  • You have missing information on your application
  • You don’t have enough credit information
• How to Solve Why Personal Loan Rejected in Singapore: Actionable Tips You Can Follow
  • Pay off your existing loans
  • Increase your credit score
  • Get a stable job
  • Take out a smaller loan
  • Restructure your debts
  • Get a cosigner
  • Make sure your loan application documents are complete and accurate

Banks and financial institutions in Singapore have specific eligibility criteria that applicants must meet in order to qualify for a personal loan. This can include factors such as age, income, credit score, and employment status. If you don’t meet these requirements, your loan application is likely to be rejected.

First, age eligibility for bank-issued personal loans starts at 21 years old. There’s also an upper age limit for borrowers, usually ranging from 60 to 65 years old.

Second, Citizenship or Permanent Resident status is also worth considering. Foreigners residing in Singapore can apply for personal loans as well, but they usually face stricter criteria for eligibility.

Third, meeting an annual income threshold is crucial to ensure repayment capability. This is typically S$20,000 to S$30,000. Lower income requirements might be available through licensed moneylenders and other financial institutions.

Lastly, proof of employment or income is also required, whether it’s through payslips, bank deposit history (for self-employed individuals), or CPF statements. Usually, banks need the latest three months’ proof of income documents.

Your credit score is a measure of your creditworthiness and ability to repay debts. Banks and financial institutions use this score to assess the risk of lending money to you.

If you have a low credit score, it indicates to banks and financial institutions that you may have a history of late payments, defaults, or even bankruptcy. All of these factors can make you a high-risk borrower, and banks may be reluctant to approve your loan application.

Take a look at this stable to see the range of credit scores with their probability of default.

It’s understandably difficult for banks and financial institutions to trust that you have the ability to repay your loan if you don’t have a stable job.

That is not all. Those who just started a new job or constantly change jobs may not be seen by banks as someone who has a stable income source.

Moreover, if you work as a freelancer or have an unstable income, banks may not approve your loan application if you fail to provide additional documentation such as contracts or invoices to show a steady flow of income.

The debt-to-income ratio is a measure of how much debt you have compared to your income. If you have a high debt-to-income ratio, banks may think you’re already struggling to manage your debts and may not be able to repay the loan you’re applying for.

According to the Monetary Authority of Singapore, the highest amount for unsecured loans, covering personal, education, and renovation loans, along with credit card lines and debts, is set at 12 times your monthly income.

For instance, if you’ve already borrowed up to 10 times your monthly income, the maximum potential loan amount allowed would be limited to two times your monthly income. Exceeding this amount means that you’ve hit the borrowing limit.

This is one of the most overlooked reasons why personal loan rejected in Singapore. Keep in mind that loan providers assess your ability to repay your loan based on your income and existing debts. If you apply for a loan that is too large, it may exceed the loan provider’s assessment and lead to your application being rejected.

Therefore, calculate first how much you can realistically afford to borrow. Taking on too much debt can lead to financial strain and may even result in defaulting on your loan payments.

Additionally, borrowing too much can also negatively impact your credit score, making it even harder to obtain a loan in the future.

As mentioned above, your job plays a crucial role in why personal loans are rejected in Singapore. That said, having a stable source of income can significantly increase your chances of getting approved for a personal loan.

Loan providers typically require applicants to be employed for at least three to six months to a year before being eligible for a personal loan. If you’re currently unemployed or have an unstable job, consider working for the suggested period first. This will show banks that you have a steady income stream and you’re capable of making repayments on time.

acing rejection for a personal loan is a common experience, especially for first-timers. Always remember that it’s not a reflection of your worth. Understanding the reasons behind why personal loan rejected in Singapore can be empowering since it enables you to work on different areas of your financial well-being.

Comparing various loan offers can also do wonders in finding the best option before applying for a personal loan. This is why taking advantage of loan matching platforms like OMY Singapore can be a proactive step forward.

Get a personalised loan offer tailored for you in just a few clicks. Get a fast personal loan in Singapore today.