In recent times, the need for borrowing has increased due to various reasons. Loans help fulfill our needs like education etc. But sometimes the loan applications get rejected and we are unable to get a loan. To avoid that, the following are the factors that you can check before applying for a loan.
The first and the most important thing that is considered by the banks is a credit score. A credit score is made up of your credit history, loans that you have taken, etc. Nowadays you can easily track your credit score through the help of the internet and that too free of cost. Generally, a score above 750 is considered good.
Your monthly income along with expenses are considered here. Moreover, banks do consider the existing loans if you have any. The stability of income is one of the important factors too. If your spouse is also earning member, then you may get added advantage because of it.
Your previous credit details are looked upon too by banks. So, before applying for a loan, make sure that you don’t have any unpaid debt lingering.
Your age is one of the important factors that is considered by banks. As age increases, capacity for loan repayment reduces due to, increased family expenses, etc. And that is why banks do hesitate to approve a loan to a person who is about to retire.
Purpose of loan:
Banks may ask you to disclose the purpose of your loan. If banks find your purpose for taking a loan is risky then chances of rejection are higher. E.g. starting a new business. Or can ask you for collateral. In that case, the loan can be provided at a higher rate.
Amount of loan:
It is a crucial factor that is considered by banks. If your loan amount is lower and your income is sufficient to pay for that then chances of acceptance of loan application are higher. If the amount of your loan is much higher than banks may ask for collateral in that case.
The particular industry’s condition in the economy is also considered by banks. The industry in which you are working is if growing at full speed, then banks may approve your loan easily. If banks do feel the industry is risky and growth is declining in it, then your application may get rejected.
The thing that you can avoid is applying for multiple loans at the same time. It affects your credit history. With a poor CIBIL score also, you can get a loan but comparatively, it has a higher interest rate. Another thing is you can get the help of a cosigner. A consigner is a person who is having a good credit history and can help the borrower for approval of a loan.