If you have applied for a loan or intend to apply for one in the foreseeable future you would know that all lenders have a set of guidelines that must be followed for any loan approval (here we will ignore what we keep hearing in news about large scale defaults and flouting of norms by lenders). Coming back to the loan approval process, all lenders scrutinize the loan applications based on the criteria that they have for loan approval. Loan applications of those who do not meet the guidelines are rejected. Here is a list of ten things that impact loan approval:
Age of the applicant
Most lenders have a minimum and maximum age criteria for the loan applicant, this varies for self employed and for salaried employees and may also vary from one lender to another and also for the type of loan. For example for car loans the minimum age of the applicant must be 18 and the maximum acceptable age is 60 for salaried and 65 for self employed. For home loans the minimum acceptable age is 21.
All lenders want to ensure that their money is returned to them in a timely and disciplined manner. For this they fix minimum income criteria for sanctioning a loan; in some cases like the home loan the minimum income criteria might vary depending on the value of the house, amount of loan sought and other factors too.
Submitting the required documents is very important for loan approval. Most lenders require that the applicant submit a valid identity and address proof, proof of income and employment, bank statements and PAN card copies. Some additional documentation may be required in some loans like for a home loan the required documents that show that it is an approved project, for an education loan the documents from the relevant university and college and so on will be required for the loan approval.
In some cases the applicant may choose to apply for a loan with a joint holder. The bank depending on the loan type, may consider the joint applicant’s details like income, credit score etc too. Sometimes the loan may get rejected if the documentation or other details of the second applicant are not as per the bank’s requirements. Some joint applicant combinations are not allowed especially in the case of home loans.
Income to debt ratio
This is the ratio of the monthly outflow in the form of EMIs to the monthly income. Even if you are paying all your EMIs on time for various loans the lender may still reject your loan. Paying on time will ensure that your credit score is good but despite that if the bank feels you are over leveraged (you already of many running loans) they will not accept your loan application.
Applicants who have stable jobs in reputed organizations or are government employees will find it easier to get loan approvals rather than people who frequently hop jobs. So someone can get personal loan for low CIBIL score too as long as they fulfill other requirements and are employed in a reputed organization.
A good credit rating can said to be the first step for loan approval. When the lender receives a loan application they first seek the credit report of the applicant, if the rating is as per what is acceptable to the lender then only it goes to the next step else it is rejected at the first stage only.
This may seem like a surprising factor that can impact loan approval but banks do consider this aspect when sanctioning certain loans. Some areas may be in the negative list of the lenders and they may hesitate to sanction loans to applicants residing in the area.
Relationship with the FI
This aspect also impacts the loan approval especially when everything is not perfect. If the applicant has a low score or has changed his/her job recently and he/she approaches a bank with which there exists no relationship then the loan application will most likely get rejected. However with similar credentials if the applicant approaches a FI where he/she has a good existing relationship the chances of loan approval are high.
Social media interaction
Social media interaction like all other fields may have a bearing on loan approvals too. Many organizations are developing techniques where apart from the usual credit rating tools, the social media interaction will also be used to judge the applicant’s creditworthiness so despite other aspects being acceptable the application may get rejected due to some negative social media presence.
Getting a loan application rejected is harrowing and sometimes confusing too so make sure you steer clear of the above when applying for a loan.
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