During festive or wedding seasons, when expenses increase, people often take personal loans. However, before approval, banks check some important factors. These include income, credit score, existing debt, age, and job stability. Individuals who meet these standards receive loans quickly and on better terms.
Personal Loan: During festive and wedding seasons, people's financial needs increase, making personal loans an easy option. However, banks thoroughly evaluate your financial profile before granting a loan. Factors such as your salary, credit score, existing debt, age, and employer's credibility determine loan approval. Banks readily grant loans to individuals with stable income, good credit scores, and a clean financial record. With proper preparation and understanding these standards, the loan application process can be simplified.
Salary and Job Stability
Before granting a loan, the bank ensures that your income is regular. The bank checks your salary and whether you have been working with the same company for a long time. Typically, if an individual has been employed with the same organization for 1-2 years, the bank considers them reliable. The higher the salary, the greater the likelihood of loan approval.
Self-employed individuals must provide proof of their income. This includes financial reports, income tax returns, or other business-related information. The bank assesses whether your business is stable and if your source of income is regular.
Credit Score: Most Important
Your credit score plays the most significant role in obtaining a personal loan. If your score is 750 or higher, the bank considers you trustworthy. This score indicates whether you have repaid your previous loans and credit card bills on time.
If your report shows entries like late payments, defaults, or too many loan applications, you become a high-risk customer for the bank. Therefore, banks tend to avoid granting loans in such cases. It is essential to check your credit score regularly. If there are any errors in the report, they should be corrected immediately to maintain a b financial profile.
Current Debt and Liabilities
Before granting a loan, the bank also accounts for your existing debt. This is known as the Debt-to-Income Ratio (DTI). This ratio indicates what portion of your monthly income is already being spent on EMIs.
If 40 to 50 percent of your income is already being spent on EMIs, the bank will hesitate to grant a new loan. Banks prioritize applicants with lower liabilities and stable income. If you have several small loans, consolidating them can also make your profile look more favorable.
Age and Repayment Capacity
Banks also consider your age. Typically, individuals aged 21 to 60 years are considered eligible for personal loans. Younger applicants have a longer career ahead, which assures the bank that they will be able to repay the loan on time.
However, banks are cautious if a very young applicant lacks a financial track record or has a weak credit history. Conversely, individuals nearing retirement are granted loans for a limited period to ensure repayment confidence for the bank.
Employer and Professional Profile
Where you work also matters significantly to the bank. If you are employed by a large, stable, and reputable company, your application may be approved quickly. Banks have greater confidence in such employees because the risk of them leaving their job or experiencing a reduction in income is lower.
Similarly, professionals such as doctors, engineers, chartered accountants, or government employees are also considered reliable by banks. Individuals working in these professions are typically deemed to have regular income and lower risk.
Taking a personal loan during festive seasons is common, but banks do not view every customer equally. If your standing is b in these five areas, loan approval will face no hurdles. Therefore, it is crucial to consider all these aspects before applying for a loan to ensure a smooth and swift approval process.
