Loan Tips: While giving a loan, banks do not only look at CIBIL, they also check these 3 ratios..
Whenever it comes to taking a personal loan, everyone must be telling you that if your CIBIL score is good, then you will get the loan. However, when a bank gives a personal loan to a person, it does not only look at his CIBIL score but also checks 3 types of ratios. Through all this, the bank wants to ensure whether you will be able to repay the bank loan money on time or not. Let us know which 3 ratios the bank checks apart from the CIBIL score.
1- Debt-to-Income (DTI) Ratio
Before giving a loan to anyone, the bank checks the debt-to-income ratio. This ratio is calculated by comparing the monthly debt payment and your gross salary. The lower the DTI ratio, the greater your chances of getting a loan. Through this ratio, the bank understands how many loans you already have and how much money is left in your hand.
2- EMI/NMI Ratio
Through the EMI/NMI ratio, the bank calculates how much of your net monthly income will be spent on the current EMI and the proposed loan EMI. If your EMI/NMI is 50-55 percent, then it is fine, but if the ratio is more than that, then the bank starts shying away from giving you a loan. If despite this, the bank gives you a loan, then it often charges a higher interest rate.
3- Loan-to-Value Ratio (LTV)
This ratio is calculated especially in the case of housing loans. With the help of this ratio, it becomes easy to understand the risk. The LTV ratio shows how much value your loan has compared to the asset or collateral. This helps in securing the loan. The lending bank uses this information to make necessary terms and conditions.
Banks also check the CIBIL score
This is a three-digit number or say a score. Its range is from 300 to 900 points. It shows your eligibility to take a loan. This number is decided based on your old loan, credit card bills, etc. If you keep paying all your loans and card bills, then your CIBIL score improves, whereas if you default on anything, then your CIBIL score deteriorates.
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