Why Was Your Personal Loan Rejected?
You have a bad credit score
Credit history is a reflection of your borrowing and repayment activities: it appears encouraging to banks if you make payments on time and have no arrears in the last 12 months. If you are a not-so-great paymaster and do indeed miss payments or worse yet, if you have defaulted on a loan, the bank might peg you as a risk.
But how do banks know about your history? Well, all of your credit card debt, loans, overdrafts, and other borrowings from authorised financial institutions are on file at the Credit Bureau of Bank Negara Malaysia under the Central Credit Reference Information System (CCRIS). Credit data provided by your bank to CCRIS over the past 12 months are captured in the system, which is then used to formulate a credit report.
In addition to credit reports from the CCRIS, banks also obtain details from CTOS Data Systems Sdn Bhd, a private agency that collects information on financial litigation matters such as bankruptcy cases brought against individuals and companies.
Banks use these reports to infer creditworthiness as well as borrowing and repayment habits of an applicant. Many personal loans in Malaysia are unsecured ones, meaning there is no guarantee to lenders that the borrower will pay it back. This is why creditworthiness is of utmost importance to banks when deciding on personal loans.
Do obtain your own copy of the CCRIS and CTOS reports to suss out possible issues which the bank may have found unsatisfactory with your credit summary.
You have too many loans
If the bank finds that you are over-committed to too many loans: you might not get another one approved. The bank will look at your other loan commitments such as house and car repayments, credit cards dues, and personal loans.
Although all banks will have a different threshold they use to decide if you are over-committed, the general rule is that most adhere to the 60% benchmark. Your monthly repayments should not exceed 60% of your net salary.
Your salary falls short of the bank’s requirements
Banks usually have a minimum income requirement for loan applications. But beyond this, some also set internal limits to how much someone can borrow based on their salary level. This differs from one bank to the next.
Banks are also less willing to consider commissions as part of the salary with which they consider eligibility. If the bulk of your salary comes from sales’ commissions, you may have a problem obtaining a loan.
You have no credit history
Bad credit history will likely be the death of your application, but so will it be if you have no credit history.
It’s not a bad thing to have zero experience with loans or credit cards, but how are banks supposed to gauge your reputation as a solid paymaster? A proven track record of timely repayment shows the bank that you understand the commitment before you, as you have upheld your end of the bargain in the past.
However, this doesn’t have to be the nail in the coffin for your loan application. Some banks are willing to overlook this by offering a smaller loan amount on higher interest.
Banks are also less willing to consider commissions as part of the salary with which they consider eligibility. If the bulk of your salary comes from sales’ commissions, you may have a problem obtaining a loan.