Personal loans have become a necessity in today's era. People with stable income sources have dreams to fulfill. However, they don't have enough funds to pay upfront and bring their dream into reality. That's the reason they always look for a reliable loan that can help them fulfill their dreams while they repay the rest via convenient monthly installments.
If you are one of those professionals planning to take a persoanl loan, you must know that every bank matches you with their checklist and ensures you fit their eligibility criteria. If you fit well, you are good to go. However, if you don't match their checklist, getting your desired loan amount is tough.
Below are the points that every bank considers while providing you a personal loan. And yes, banks can reject personal loan applications. Indeed, a majority of the loan applications are rejected by banks in te process of underwriting such loans.
Your Credit History: Every bank prefers professionals with good banking habits. A good credit score tells the discipline of a person towards paying the dues, existing EMIs, etc. A person who always pays the dues before the last date and has a clean character in repaying the dues has high eligibility to get a loan.
The credit history is calculated in the form of a credit score. A good credit score varies between 700 to 800.
Your Occupation: You are already familiar with the fact that banks have minimum queries with government professionals. The reason being people with stable job have a high potential to repay the loan amount. Moreover, banks also prefer blue-chip companies that have a global presence and high job stability for their employees.
In short, people working in private startups have the lowest ranking in terms of getting a loan. This doesn't mean they can't get a loan. Regular income is still considered a strong factor for loan eligibility.
Your Age: Age is yet another crucial factor that is considered in loan approval. The older you are, the lower life expectancy you have. Moreover, with older age, you get less time to repay the loan amount.
Hence, youngsters with handsome income are more preferred with old age people with the same income.
Your Work Experience: Your loyalty towards your current company is acknowledged with your working experience. Banks always ask for your work experience with the current company. This helps them recognize your job-switch frequency. E.g., People working for 10+ years in a company have a high preference over people working for a few years in a company.
With this, the stability factor is also acknowledged to ensure the trustworthiness of the company.
Income Source of Your Spouse: If you are a working professional in the private sector, banks will always consider your spouse's income as well. Spouse income is considered to ensure in case you fail to repay the EMI; your spouse can continue the repayment without delay. With a working spouse, banks stay assured of no default scenario.
Another reason for considering spouse income is that her income is added to your income to derive your monthly income. This helps you take a bigger loan hassle-free.
Repayment Period: Every loan has a maximum repayment period. E.g., A housing loan has a maximum repayment period of 25 years. However, not everyone considers such a long repayment period. Banks always prefer people that choose a longer repayment period. Moreover, banks don't consider professionals who opt for a short loan period. This is because a short loan period results in low interest, which doesn't satisfy the banks.
Hence, banks are always happy to pay you a loan for more than five years, depending on what type of loan you are looking for.
Your Relationship With Bank: Nowadays, everyone has a salary account where (s)he draws the salary. Based on your salary and other facilities, you build a relationship with the bank, which is a positive signal when opting for a loan. Regardless of your loan type, relationship with the bank is always considered a factor in getting quick approval and disbursement.
Also Read- Common Personal Loan Rejection Reasons
E.g., if you have a salary account in a particular bank. Simultaneously, if you own a credit card, vehicle loan, and a few other financial assets from that bank, you have a high variability of getting another loan. However, all other factors are still considered before approval.
So, these are the prime factors that are considered when you look for a loan. Every bank or NBFC considers these factors to ensure you are the right person to lend the money.
If you are already a defaulter (in any way) it's crucial to first clean your credit history and start building it from scratch. No financial firm can lend you money in case you have bad credit history. Instead, a defaulter is blacklisted from applying for a loan in any banking firm across the country.
In the end, it's crucial to keep in mind that you are the one who has to repay the loan. Hence, it's essential to think twice before selecting the loan amount and plan its repayment without facing any financial crisis.
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