If you are thinking of taking a personal loan, then it is important to know that just applying to the bank is not enough. Getting a loan also depends on your financial condition and how trustworthy the bank or financial company considers you. Many times people apply for loan and their application gets rejected. The reason for this is not understood, but there are some important things behind it. Let us know about those 5 big reasons which affect your ability to take loan…
bad credit score
Credit score shows your loan repayment history. If you have taken a loan before and have not paid the installments on time, or your credit card is continuously outstanding, your score may go down. Most banks prefer a score of 720 or above. If your score is below 600, it may be difficult to get a loan.
more debt
Banks have to see how many loans are already available against your current income. If a large part of your salary is going towards the EMI of the existing loan, then it becomes difficult to take a new loan. This is called ‘debt-to-income ratio’. The higher this ratio is, the lower your loan eligibility will be.
low income
If your income is very low, then the bank fears that you will not be able to repay the loan installments on time. In such a situation, even if your score is good, the loan may be rejected due to your income. The bank matches every month’s EMI with your income.
Asking for a huge loan amount
If you have asked for more loan than required and your earnings are not able to justify that amount, then the bank can flatly refuse. The bigger the loan, the bigger the responsibility, the bank will give the loan only when your income can bear that burden.
Other small but important things
There can be some other reasons for loan rejection, which people often ignore. Such as your age being too old or too young, mobile number not being linked to Aadhar card, you have not filed ITR (Income Tax Return) for the last few years and lack of stability in job or being in trial period. All these things can become a hindrance in getting the loan approved.