Money rules the roost in our world and financial emergencies can arrive at our doorstep at any moment, putting us in a quandary. The extent of these financial requirements can alter the course of our live, throwing our plans out of gear, typically backing us into a corner. Now, like most other problems, financial situations can also be handled, thanks to a number of products offered by banks and NBFCs. Choosing the right tool is critical to combat such issues, with a personal loan being the best bet to suppress immediate financial emergencies.
Growing competition has ensured that banks, NBFCs and private lenders are more than happy to provide financial support, at certain interest rates of course. While private lenders do not typically insist on eligibility criteria to avail financial aid, established players like banks and NBFCs have a number of requirements which need to be fulfilled. The ability of an individual to overcome a financial emergency through the use of a personal loan depends on his/her ability to satisfy certain basic eligibility criteria.
Factors which impact your Personal Loan Application:
Earning money is hard, and making money in a short period of time is even harder, which is why banks, NBFCs and private lenders are willing to provide financial assistance to those in need, subject to them satisfying a few basic personal loan eligibility criteria.
Income - Gone are the days when people could borrow money and repay the loan without interest, with all lenders typically charging an interest on their “investment”. Repayment of their loan becomes a key factor, which directly hinges on the amount of money a borrower makes. Almost all banks and NBFCs look at the income of an applicant, gauging his/her repayment capacity before sanctioning a loan. The higher the income of an individual, the higher are the chances of him/her availing a loan, with a direct correlation often seen between these two factors.
Job description and status – We live in a world where the type of work we do matters immensely, be it in our social life or in our pursuit for financial aid. Banks and NBFCs typically look for people who are in a steady job, having a good record of being in the same company for a particular period of time. Applicants who work in hazardous industries (armed forces, mining, forestry, etc.) can be viewed as negative by banks, with it possible to have their application rejected. Similarly, those who work for top companies or in government sectors stand a chance of getting their loan application processed faster. This boils down to the judgement of the lender and could vary from case to case.
Personal standing – The relationships we maintain in pour lives can have a deep impact during certain situations, which is true even in the case of loan applications. Most lenders look at the relationship a prospective borrower has with them, with it easier to avail a loan based on this criteria. Individuals who have a good personal standing with a bank or NBFC could see faster approvals and simplified documentation compared to those who have no personal standing with the lender. Additionally, the reputation of a person in society can speak volumes, with lenders keen to ensure that their customers have a clean rep.
Banking history – It is often said that history provides a glimpse of the current world, with it being especially true in the case of banking. The financial history of a borrower plays a critical role in determining whether or not his/her application is approved or rejected. A history of timely repayments and sensible banking functions is a huge positive, with banks and NBFCs fast-tracking the application of such individuals. Similarly, members who have defaulted on loan repayments in the past or have a dubious record might find it harder to get the loan sanctioned.
Credit score – A credit score is perhaps the most important tool which determines the personal loan eligibility of an applicant. Almost all banks and NBFCs rely on this score to gauge the application of an individual, with the score providing information about past loans, repayment history, other applications, etc. A good credit score is often sufficient to avail a loan, with scores in the range of 600 – 700 considered good in most cases. Individuals can check their credit score before applying for a personal loan, thereby availing an opportunity to improve on it, if required.
Age – The age of an applicant can play a role in the application process, primarily on account of loan repayment. Lenders are typically cautious in the case of young borrowers (those who have just passed out of college, into a first job) and in cases of elderly borrowers (those approaching retirement). This is because most youngsters might not be in a position to repay the loan on account of lifestyle changes and habits, whereas those approaching retirement might be unable to repay the loan on account of diminishing financial income. While not an extremely important factor, age can impact a loan application.
Assets – Individuals who own assets and are willing to provide them as security are likely to get a loan application sanctioned faster than those who don’t have such assets or are unwilling to offer them as security. This is because a collateral ensures that a borrower has repayment on his/her mind and is less likely to default. In addition, the fact that a property/gold/investment is attached to a particular loan provides additional incentive to a borrower to repay the loan on time.
Loan amount – The amount of money one requires can determine whether an application is accepted or rejected. Typically, the loan amount should not exceed a particular benchmark, with this benchmark determined on a case to case basis. Asking for an amount which is over the required limit could make lenders cautious, which could eventually lead to an application being denied. Choosing an amount which offsets the requirement without leaving additional income is perhaps the best way to proceed, with lenders happier to provide loans for smaller requests.
