5 critical factors that impact your loan approval17 April, 2019
By Abhijeet Kumar “It's easy to get a loan unless you need it.” Those were some powerful words by Norman Ralph Augustine, the former CEO of Lockheed Martin. And you’ll know what he said is true, when you approach a financial institution for loan approval. Once you put in your application, they pull out your credit report, and the credit score is the first thing they look at. That 3-digit number decides whether you’ll get your loan or not. A number 750+ looks promising to the lenders. It can get you in their good book and has your loan approved easily. But, apart from that credit score, there are many other factors that determines the chances of your loan approval. And here are the 5 important ones –
1. Credit historyAlong with the credit score, your credit report also consists of the details of all your previous loans. The report also includes your repayments – timely or late, outstanding balance, is the loan closed or active and various other information. All those insights help lenders decide whether they should approve another loan. Suggested Read – Instant Personal Loans Online to Give you the credit You Deserve
2. Work experienceThe lenders also like to know how stable your income is, to assess the risk factor. Even if the credit reports of two people are similar, a person with 5 years in one job would be preferred over someone who changes it every year or so. While most banks and NBFCs prefer individuals with 3 years of employment, Monexo, an online lending platform, requires only 3 months of work experience with the current employer.
3. Repayment capacity
“Debt is like any other trap, easy enough to get into, but hard enough to get out of.” – Henry Wheeler ShawBanks calculate the debt ratio to determine your repayment capacity. It’s the ratio of your existing debts and outstanding balances to your cumulative income. They want to be sure that you have plenty left even after EMI payments. Additional sources of income too, say, rental income, in such cases will portray you as a financially healthy person. And as someone with better repayment capacity.