For multiple reasons extra financial support can be needed. For that, we often think about getting some personal loan to solve the problem. To get a personal loan, you have to first make an application to your bank. The bank will first review your details and applications and then the further steps. Getting a personal loan can be tricky, as it depends on some factors.
For these 5 reasons your application for a personal loan can be rejected:
1. Salary
Lenders (banks or fintech companies) want to ensure that your income is stable so you can repay the loan. A higher income level increases your chances of loan approval. Working for the same company for 1-2 years is also beneficial. Self-employed individuals will need to provide proof of income, such as financial reports or tax returns.
2. Credit score
A score of 750 or higher is considered good. This indicates that you’ve repaid past loans on time. If you’ve missed payments, been late, or filed too many loan applications, approval may be difficult. Check your score regularly and correct any errors in your report.
3.Current debts and liabilities
Before granting a loan, banks consider your debt-to-income ratio (DTI), which shows how much of your monthly income is already going towards EMIs. If more than 40% of your income is going towards EMIs, your chances of getting a new loan decrease. Paying off old debts early or consolidating loans can improve your eligibility.
4. Age and Repayment Capacity
Young applicants, with many years of income ahead, are considered less risky. However, applying too young can be detrimental if your financial record isn’t good. Most banks consider the ideal age range to be 21 to 60 years. The loan term is typically set until your retirement age.
5. Employer and Profile
Where you work is also important. If you work for a well-known or stable company, your loan application may be approved more quickly. Banks consider those with professional degrees or those in regulated professions (such as doctors, engineers, and CAs) more trustworthy.
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