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There are a lot of things that the lender has to keep in mind while accepting the personal loan application, from checking the borrower's creditworthiness to facing the non-repayment and default instalments. The lender has experienced a lot, and they already know the type of customers they're looking for. So a lot of groundwork has to be done before the loan application is evaluated.
It's not enough to have a steady employment status and a good credit score. In addition, the bank needs to be convinced that you'll be able to handle the monthly payments. The following are some of the most critical factors banks will consider when reviewing your personal loan application.
And it is essential for the lender to do a risk evaluation as a personal loan is an unsecured loan. So banks don't have any security like assets or gold. So they use other factors to build trust. So they do a thorough evaluation of each factor before making any decision. Some of the main points that are evaluated are:-
- Credit Score
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Income
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Employment Status
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Credit Repayment History
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Loan Amount
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Savings
Credit Score:- It is a three-digit score that will determine how creditworthy a customer is. And your credit score is a result of your past credits, loans and debts. So if you have a credit score of 800 and above, then banks will assume that you're very good with your fund management and your past loans have been repaid on time. This will make you a suitable applicant for a personal loan. However, if you have a low/bad credit score, then banks will either reject your application, or you'll be paying extra money as an interest amount. So it's advisable to keep a decent credit score of at least 750 to be eligible for a personal loan facility.
Income:- Banks need some kind of security to confirm that the borrower will repay the amount they've borrowed. So if you want to be eligible for an Indiabulls personal loan, then you should have a minimum income of at least INR 10,000. The loan amount sanctioned will be according to your income, as banks can only use 50% of your monthly income for EMI. So if your income is less, then you'll only get a loan amount according to that. For example:- If your income is INR 30,000 and the loan amount that you want to borrow is INR 10 lakhs, then the bank will automatically reject your application, or you'll be offered a low loan amount.
Employment Status:- You have to be employed in order to get your personal loan application approved. As we earlier mentioned, banks need some security. So instead of asking individuals to pledge their gold or assets. Banks will only accept applications from those individuals who have a stable job and a stable monthly income. So you'll have to be either a salaried or a self-employed individual to get your application approved.
Credit Repayment History:- Banks check the way you've paid your past loans, debt and credits. So if you've ever missed even a single instalment, then the bank will verify whether or not you're an eligible candidate. It's essential to repay the loan instalments on time, without having any defaults. So repay all your past debts before applying for an instant personal loan app.
Loan Amount:- The loan amount depends on your past credits and income. So if you're someone who has a low income, then you won't get a high loan amount sanctioned. And if you're someone who has a high income but you don't repay your loan amount on time, then banks will either reject your application or will sanction a low loan amount. Your relationship with the lender also determines the loan amount that will be sanctioned.
Conclusion:-
Applying for a personal loan can seem like a cakewalk. But it's important to compare all your options and then choose an ideal loan option according to your capacity.