Which Factors Influence Personal Loan Approval?

Are you planning to apply for a Personal Loan? Or have you already applied once but your Personal Loan got rejected?

When borrowers Apply for a Personal Loan, lenders check their income, previous payment records, credit history, credit score, employment status, and other factors. Based on these factors your Personal Loan eligibility is determined.

An excellent stable income and credit score of 650 and above can result in Personal Loan approval. That is because a regular monthly income and clean credit history show your creditworthiness.

To verify your employment status, lenders will scrutinize your employment and income related documents, such as appointment letter, salary slips, bank statements, and so forth. If you’ve switched jobs regularly, it may become a hurdle in loan approval process.

If you keep on switching your jobs frequently, lenders assume that you will not earn a steady income, which may result in creating hurdles in clearing your debt. That is the reason why most lenders prefer borrowers to continue their job for a specific period.

If you are thinking of obtaining a Personal Loan in future, try to stay with your employer for a more extended period.

Depending on your eligibility, lenders may approve or reject your Personal Loan application and can also impact on the interest rate of your loan.

Here are some crucial factors that impact your Personal Loan approval and interest rate:

Income

Working with an employer for a long period and earning a pretty high monthly income can work in your favour if you are applying for a Personal Loan. These factors show your repayment ability. If you meet lender’s income eligibility criteria, you may also get a Personal Loan at a low interest rate.

By submitting the required documents as a proof of stable job and high income, you can negotiate for a good rate of interest with your lender.

Lenders look at these factors to ensure you will pay each instalment timely.

Credit Score and Credit History

To avail an unsecured loan like Personal Loan, credit score and credit history play an important role. The more your credit score is, the lower your loan’s interest rate will be.

If you have ever taken a Credit Card or a loan in your name before, credit bureaus like CIBIL will analyze your repayment behavior and based on that you will be given a credit score (ranging from 300 to 900).

Relationship with Lender

Maintaining a good relationship with the lender who is offering you a Personal Loan can help you secure a low-interest rate deal. If you have an existing savings account or fixed deposit with the lending bank, your chances of getting a Personal Loan approval from the same bank increases.

The Reputation of Your Employer

Working with a well-established employer improves your chances for Personal Loan approval. You can obtain a great personal loan deal at low-interest rate if your company’s reputation is high. On the contrary, if your employer is a start-up or a small and unstable company, getting a loan at an attractive interest rate may become difficult.

Also Read : 7 Things to Keep in Mind if You are Thinking About a Personal Loan

The primary reason for this is lenders feel that borrowers who work with well-established companies generally have a steady career and good income. Their salary usually gets credit to their accounts regularly on time. Lenders typically prefer employees who have a regular flow of income. Hence, your employer’s reputation plays a vital role in determining whether you will get a Personal Loan or not and what should be the interest rate.

In addition to the points mentioned above, there are some other factors that lenders consider while deciding the interest rate of a loan, including:

· Current inflation rate

· Changes in government policies

· Borrower’s age

· Fluctuations in RBI’s guidelines, and so forth

Before applying for a Personal Loan, consider the factors mentioned above and improve your chance of getting approval.

If you are in need of personal financing to meet any of your personal needs, visit www.mymoneymantra.com, a financial services distributor having experience of over 25 years and offering products of more than 50+ lending partners. For more information, call our Loan Specialists toll-free at 1800 103 4004.