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5 Important Factors That Decide Your Personal Loan Approval!
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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.
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Availing a personal loan is an easy and convenient means to fulfil your many dreams. Be it a lavish wedding, a luxurious holiday, or a medical emergency, a personal loan can come to your rescue in times of an emergency. Moreover, with digitalisation, applying for a loan is a few minutes job. However, various factors determine your loan application approval.. If you are looking forward to availing a personal loan soon, being aware of these factors can help you enhance the chance of loan approval.
Here are five important factors that determine your personal loan approval.
Your age is a vital factor for personal loan approval as it reflects your earning ability. If you are in your 20s, you have many years to earn and repay the loan comfortably. This is why it is easier for young applicants to get approval for a loan. However, in your late 40s or 50s, you have few years to earn, which can be a reason for rejections. Usually, lenders prefer applicants who are between 25 to 55 years old.
Your income is a crucial part of your financial profile and helps determine your repayment capacity. Lenders require you to have a minimum amount of annual/monthly income based on the city you live in. Failure to meet this requirement can lead to personal loan rejections as it can create doubt on your ability to pay EMI timely. You must check the income eligibility and ensure you meet them before applying. Also, you can club in your passive income like rental income, investment interest, etc., to assure the lender of your creditworthiness.
Lenders rely on your credit score to approve your loan application, as there is no collateral. The credit score indicates your repayment capacity and creditworthiness. Your credit score is a vital metric that helps lenders determine if you are capable of repaying the loan and can be relied upon. You must maintain a credit score of 750 and above if you wish to apply for a personal loan. It is best to check your credit score and credit report before applying. You might have to take steps to improve the score for approval.
When you avail a personal loan, you must have a steady flow of income to be able to repay it. Lenders seek assurance for the same by considering your job stability. Lenders consider your work experience and job profile to ensure that you have a steady and regular flow of income. Therefore, you must avoid switching jobs before applying for a personal loan.
Your debt to income ratio is a crucial factor in personal loan approval. Lenders like to assure that your income is sufficient to pay your loan EMI and other debts. The debt to income ratio is calculated by dividing your total debt by your income. Lenders might refuse to approve your loan application if you have too many debts. Therefore, you must aim to keep the debt to income ratio below 50%. Anything above can indicate that you are more likely to default on the loan repayment.
Being aware of these factors can help you minimise mistakes while applying. Ensure that you meet the eligibility criteria and check your affordability through a personal loan calculator while applying. Visit the website and apply for personal loan today.
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