Loan Application Rejected? Here Are Common Reasons

Even with stable income and complete documentation, many loan applicants are surprised to find their loan requests denied. What’s more frustrating is that these rejections often come without a clear explanation. This article highlights some of the lesser-known yet common reasons why loan applications may be declined—and offers practical solutions to help you prepare a stronger loan application with Shinhan Finance.

1. Negative Records on Your Credit Report (CIC)

Common scenario: You may have missed a small payment in the past on a loan or credit card and forgotten about it. However, this record could still appear on your CIC (Credit Information Center) report, lowering your credit score.

Common issues include:

• Having overdue debts rated at Group 2 or higher, often without knowing it.
• Outdated or incorrect personal information on your credit report.

What you can do:

• Check your credit report every 6 months to detect and correct any issues early.
• Pay off outstanding debts and maintain a clean payment history for at least 12 months before applying.

2. Incomplete or Unverifiable Income Records

Typical case: Some applicants receive salaries in cash or withdraw their entire salary immediately after it is deposited. If your bank statements don’t show consistent income, your application may be seen as high risk.

Recommendations:

• Receive your salary via bank transfer for at least the last 3 months.
• If you’re paid in cash, submit a signed labor contract and a stamped salary confirmation letter from your employer to prove your income.

3. Too Many Existing Loans or Credit Obligations

Your credit score also reflects your current debt burden. If you:

• Are repaying three or more loans,
• Use over 70% of your credit card limit,
• Frequently use salary advance apps,

...your application may be categorized as high risk.

Advice:

• Limit yourself to 1–2 ongoing loans at a time.
• Keep your debt-to-income ratio below 40% when applying for a new loan.

4. Inconsistent or Inaccurate Personal Information

If your personal documents show inconsistent details, your application may be flagged for lack of transparency. Common discrepancies include:

• Mismatched addresses between your ID and rental contract.
• Different company names on your labor contract and payslip.
• Unstable phone numbers, such as recently activated SIM cards.

Tips:

• Ensure all documents—ID, address proof, labor contract, bank statements—are consistent.
• Register with a verified phone number that you’ve used for at least 1 year.

5. Applying for an Inappropriate Loan Product

Each financial institution has specific eligibility criteria for its loan products. Choosing the wrong product can lead to delays or rejection.

At Shinhan Finance, current loan offerings are best suited for:

• Employees receiving salary via bank transfer,
• Applicants who can provide valid proof of income (e.g., labor contract, payslips).

Unsupported loan types include:

• Loans based on utility bills,
• Loans based on social insurance.

Helpful tips:

• Carefully review the eligibility requirements before applying.
• Speak with a loan consultant to get matched with the most suitable loan product.

3-Step Loan Support Process at Shinhan Finance

To increase your chances of approval, follow this recommended process:

Step 1: Pre-application consultation – assess the strengths and weaknesses of your profile.
Step 2: Recommend the most suitable loan product – based on your income and actual needs.
Step 3: Guide you in supplementing necessary documents – to complete your application smoothly.

What to Prepare Before Applying?

• Check your CIC report for free at participating banks.
• Visit the Shinhan Finance website for detailed application guidelines.
• Contact our hotline 1900 5454 49 for free consultation and support.

Don't let hidden reasons affect your right to access the financial support you need. With a well-prepared and consistent application—and the right loan product—your path to fast and efficient approval at Shinhan Finance is just a few steps away.

Shinhan Finance