Common Causes Behind Personal Loan Rejections in the Philippines

Facing rejection is always challenging, especially when it involves financial matters such as a personal loan application. The frustration compounds when you consider the time and effort invested in gathering the necessary documents. The desire to understand why your loan application was rejected is natural, as you seek clarity on the reasons for the denial. Rather than allowing this setback to overwhelm you, it’s prudent to delve into the reasons behind it and devise strategies for future applications.

Unveiling the Key Factors Behind Personal Loan Rejections

In the Philippines, the approval of personal loans hinges upon a comprehensive assessment of an individual’s financial records and credit history. When a rejection occurs, it’s likely due to one of these factors playing a significant role.

1.Burden of Excessive Debt

Initiating a loan application while burdened with multiple existing debts is inadvisable. If your financial institution perceives your debt situation as precarious, your application is more likely to face rejection. To avoid this scenario, maintaining a low debt-to-income ratio is crucial. Ideally, this ratio should be 12% or lower. It’s calculated by dividing your monthly earnings by your outstanding debt. If this ratio is high, it’s wise to delay your loan application until a portion of your debts has been settled.

2. Falling Short of Loan Requirements

Thoroughly understanding the lender’s requirements is crucial. Failing to meet even one of these prerequisites could be the reason behind your loan rejection. Requirements can vary among local banks, depending on the specific loan type. For instance, applying for a loan with Citi requires having a credit card. Additionally, when seeking a personal loan from a local bank such as BPI, proximity to a branch of the lender becomes a pertinent factor.

3. Overambitious Loan Amounts

Requesting an excessively high loan amount in comparison to your repayment capacity is a common reason for rejection. The disparity between the amount applied for and your repayment ability can lead to rejection. Using your bank’s online loan calculator can prevent this mistake. This tool calculates interest and monthly payments, offering insights into your borrowing capacity. It provides a clear picture of a realistic loan amount based on your income, helping you avoid unrealistic loan applications.

4. Oversights and Inconsistencies

Thoroughly reviewing every aspect of your application is essential to avoid errors that could jeopardize approval. Ensuring the accuracy and completeness of personal information is pivotal at this stage. Inaccuracies can lead to delayed loan processing, underscoring the importance of responding to follow-up calls from the bank. This diligence reduces the risk of rejection due to incomplete or inaccurate information.

5. Insufficient Income

Even if you have a substantial account balance, banks and lending companies will reject your loan application if you fail to meet their monthly income requirement. Confirming that your income aligns with the lender’s minimum requirement is essential before proceeding with an application. For example, Citibank mandates an annual income of at least PHP 250,000 (approximately PHP 20,833 per month).

6. Inconsistent Employment Records

In addition to income, a borrower’s employment history significantly influences loan approval. Frequent job changes and extended employment gaps can adversely affect your credit score. Most banks require a minimum employment duration of one year. Demonstrating stable employment history and tenure enhances your chances of approval.

7. Impaired Credit Rating

A robust credit score is essential for loan success. Surprisingly, individuals with stable jobs and substantial incomes often encounter rejection. Credit history and score, while integral, are only components of a broader assessment. Errors within credit reports can lower your score, necessitating regular checks to identify and rectify inaccuracies.

Factors Influencing Credit Rating Assessment

Determining credit scores in the Philippines varies among institutions, each employing its standards and methodologies. Although financial entities compute credit scores, several common indicators contribute to this evaluation. A comprehensive understanding of these factors demystifies credit rating determination:

  • Payment history: This record delineates payments made to financial institutions and adherence to payment schedules.
  • Borrowing duration: The length of time devoted to repaying loans offers insight into a borrower’s consistency.
  • Loan amount: Loan repayment capability holds significance, with excessive debts potentially jeopardizing timely repayments.
  • New credit: Frequency and quantity of new accounts opened influence credit evaluations.
  • Types of credit: A mix of credit types, such as credit cards, personal loans, and business loans, impact ratings.

The Significance of a Strong Credit Score

Maintaining an impressive credit score is pivotal for loan approval. It reflects your ability to adhere to loan terms and bolsters your financial credibility. Given the limited financial literacy among less than a quarter of the Filipino population, credit scores wield substantial influence. Awareness of this metric empowers better financial decisions and enhances savings prospects.

The Advantages of a Robust Credit Score

A strong credit score ushers in an array of benefits, elevating your financial prospects:

  • Negotiating leverage: A solid credit score can facilitate interest rate reduction through skillful negotiation.
  • Eligibility for higher limits: Approval for higher loan amounts necessitates a credit score that demonstrates reliability.
  • Enhanced loan and card approval likelihood: A robust credit score boosts loan and credit card approval chances.
  • Favorable interest rates: Optimal credit scores secure lower interest rates, alleviating financial burden.

Strategies to Elevate Credit Scores in the Philippines

Improving your credit rating is a prudent endeavor. Adhering to these practices can catalyze credit score enhancement:

  • Timely bill payments: Consistently paying credit card bills on time bolsters credit score.
  • Prudent loan applications: Simultaneous applications for multiple loans can lower credit scores.
  • Early credit establishment: Initiating credit card usage early cultivates a robust credit history, facilitating loan approvals.
  • Leveraging telecom data: Financial institutions employ telecom data for alternative credit scoring, enhancing assessment precision.

Fundamental Considerations before Loan Application

Achieving financial stability is a cornerstone of life, with loans emerging as potential tools. Pondering the fundamental aspects of loans is pivotal:

  • Loan types: Secured loans necessitate collateral, while unsecured loans don’t, impacting interest rates.
  • Credit score importance: Credit scores influence loan eligibility, classified by scores exceeding 300 as favorable.
  • Fee awareness: Comprehensive understanding of associated fees is essential, alongside assessing their financial implications.

Frequently Asked Questions

Addressing pertinent queries assists borrowers in navigating the loan landscape:

Personal Loan Definition

A personal loan is extended by financial institutions, often without a deposit requirement.

Loan Utility

Personal loans fund diverse expenditures, from business ventures to education costs, debt settlement, and dream vacations.

Borrowing Limit

Personal loan amounts vary, from a minimum of 10,000 to potentially 2 million pesos, contingent on loan terms.

Eligibility Criteria

Applicants must be 21 years old and permanent residents with a favorable credit score. Meeting lender-specific requisites, including possessing a credit card, is imperative.

Application Requirements

Common prerequisites include a completed application form, valid government ID, recent payslip, and, depending on employment status, relevant tax returns.

Loan Repayment Duration

Loan terms range from six months to 60 months, offering flexibility.

Loan Comparison Online

Numerous providers’ websites facilitate loan comparison, requiring the meticulous opening of multiple tabs.

Monthly Payment Calculation

Online personal loan calculators determine monthly payment amounts with ease.

Reapplication After Rejection

Specific reapplication periods are set by lenders. Waiting three to six months is recommended if no stipulated timeframe exists.

Post-Rejection Action

Rejection offers an opportunity for growth. Strengthening financial habits and ensuring compliance with requirements elevates future approval prospects.


Personal loan rejections can be disheartening, but they also offer opportunities for growth. Understanding the underlying reasons, bolstering your credit score, and meticulous adherence to loan requirements will pave the way for future successes. Embrace rejection as a stepping stone toward enhanced financial literacy and well-being. Your future self will undoubtedly appreciate your efforts.

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