Your credit score for personal loan is a three-digit number that represents your previous credit repayment behavior. It is a crucial factor in the evaluation of your creditworthiness, serves as the foundation for risk-based pricing by lenders, and is gradually making its way into background checks for job applicants.
But even with a consistently high credit score for personal loan which you saw when you did credit score check, a borrower must still complete the following five requirements to avoid having their loan application rejected:
Youngster’s age –
Your current age as well as your expected age at the end of the loan term will both be taken into account by the lender when deciding whether you are eligible for a loan or not. Individuals who do not fit inside the lender’s specified minimum and maximum age ranges often have their loan applications rejected. The process of approving credit applications is often more challenging for applicants who are getting near to retirement age. This is because it is usually preferred by lenders that loan repayment be finished before the borrower retires. This is because after retirement, the borrower’s regular income stream will either cease or drastically reduce.
The failure to meet the eligibility standards for minimum income –
After reviewing your CIBIL report, one of the first criteria that lenders employ to determine your loan eligibility is the minimum income requirement. The borrower’s geographic location, including whether they reside in a metropolis, an urban, a semi-urban, or a rural area, often determines this. Even if you meet all other eligibility standards, such as having a high credit score when checking your credit score for personal loan or being of a specific age, your request for a credit card or loan may be rejected right away if you don’t make at least the needed amount of money each month.
It is in your best interest to go to an online money marketplace because, despite having a great CIBIL report, the minimum income criteria differ from lender to lender. This will make it simple for you to compare and choose from the many loan possibilities and possible lenders that will make offers based on your eligibility and unique financial needs. Consider adding a co-applicant to increase both your overall eligibility for the loan and your likelihood of having it accepted. However, in addition to completing the other crucial eligibility requirements stated by the lender, be sure that the co-income applicant’s is substantial and reliable.
An extremely high EMI to income ratio –
Even though your credit score for personal loan was good when you performed credit score check, this important but less well-known factor will cause your loan application to be rejected. The term “EMI to income proportion” describes the fraction of your gross income that is used to pay off debts like credit card bills, loan EMIs (including the EMI for the new loan), and other comparable expenses. It is conceivable that a borrower’s loan application would be denied if their EMI to income ratio is higher than 40% to 50%. Typically, lenders favour lending money to candidates whose EMI-to-income ratios fall between the range of 40% and 50%.
You may wish to consider prepaying part or all of your previous loans if your ratio is higher than this range. This would decrease the ratio of your EMI to income and boost your loan eligibility. You can either complete or partial this. Additionally, if the EMI to income proportion is kept at or below the acceptable level, you can choose a longer payback period for the new loan, which will result in a lower monthly instalment amount (EMI). However, take into account that a longer-term entails higher overall interest charges. As a result, you should attempt to make prepayments if you have extra money because doing so will reduce the overall interest payment. You can make prepayments whenever you have additional cash. Also keep in mind that when you look at your CIBIL report, you can see an overview of all loans and EMIs.
Descriptions of jobs and security-
Besides doing credit score check, many financial institutions consider the nature of your profession, its stability, and the status of your employer when deciding whether or not to extend you credit. Because there is a higher prevalence of employment certainty among individuals working in either of those sectors, lenders may have a predisposition to prefer financing to those in the government sector or with top corporations and MNCs.
This is in contrast to individuals who are employed by less well-known or financially risky businesses. Candidates who work in hazardous occupations may have a lower chance of getting their loan application accepted due to the increased level of risk involved. Frequent job hopping may be seen by lenders as a sign of a precarious profession and variable income.
Co-signing a debt with another person –
The guarantor is responsible for covering the shortfall if the primary borrower orco- borrowers fails to repay the loan in full and the default even appears on the credit report. You jointly assume responsibility for the loan’s repayment when you sign on as a guarantor for someone else’s debt. When considering the guarantor’s ability to make payments, lenders consider the outstanding amount of a guaranteed loan as a contingent liability. As a result, the guarantor’s eligibility for a loan is reduced to the same extent, which raises the risk that the loan will be denied.
Make it a habit to thoroughly assess the likelihood that you will need financial support shortly before committing to acting as a loan guarantor. When you do a credit score check of the principal borrower(s) and the guarantor, a delay in repayment or default would have a negative effect. Therefore, while the guaranteed loan is being repaid, it is crucial to constantly check the repayment activities in the guaranteed loan account.
