Loan Tips: Worried about your loan application being rejected? Banks keep a close eye on these 7 things..

In today's world, taking out a loan is no longer a last resort or a matter of desperation.  Whether it's buying the latest smartphone, getting your dream car, building your own house, or funding your children's higher education, loans have become an integral part of people's lifestyles to fulfill every need. This is why banks are now actively attracting customers with advertisements for 'instant loans' and 'minimum documentation'. But have you ever wondered why, out of two friends working in the same company, one's loan gets approved in 5 minutes while the other's is rejected?

The truth is, banks don't just look at your face or your salary slip. There's a whole mathematical process behind loan approval. So, if you're planning to take out a loan, it's crucial to understand these 7 major factors to ensure your application gets approved on the first try.

Credit Score

First and foremost, any bank will check your CIBIL or credit score. This score is typically between 300 and 900. This score is based on your payment habits if you've previously taken out loans or used credit cards responsibly.

The Numbers Game: If your score is above 750, you can become a bank's favorite, meaning you can get a loan instantly. A low score, however, indicates that you have previously defaulted on payments.
Important Note: If you have no credit history, start building your score by taking out a small consumer loan or a credit card and paying your bills on time.

Your Job and Work Experience
Before granting a loan, the bank wants to ensure that you have the capacity to repay the borrowed money. For this, they assess your job stability, among other things.

Who Benefits: Government employees, employees of reputable private companies, doctors, and professionals like chartered accountants are considered 'safe' by banks.
Work Experience: If you change jobs every six months, the bank may refuse to give you a loan. In fact, spending at least 1-2 years at your current company can help you get a loan.

How much time do you have?
It's important to know that age plays a big role in loan approval. Banks want you to repay the loan during your working life.

Young applicants: Banks easily give loans to people aged 25 to 40 because they have many years left to earn.
Close to retirement: But if you are 55 years old and are asking for a 20-year home loan, the chances of rejection increase. In such cases, you may have to opt for a shorter loan tenure.

Actual Income and Bank Balance
Having a high salary alone is not enough to get a loan. The bank looks at how much money you have left in your hand after expenses.

Savings calculation: If your salary is around ₹50,000 and you are already paying ₹30,000 in EMIs, it will be difficult to get a new loan. The bank checks whether you have enough money left to run your household after the EMI deduction.
Joint loan: If your income is low, you can increase your loan eligibility by making your working spouse a co-applicant.

Loan Repayment Tenure
Before giving any loan, the bank checks the loan tenure, which directly affects your approval.

Short-term loans: Smaller loans like personal loans, which are for 1 to 5 years, are approved quickly.
Long-term loans: For large loans like home loans that run for 20-30 years, the bank checks very carefully because the risk increases with time.

Guarantee or Collateral
There are two types of loans: secured and unsecured.

Secured loans: If you take a loan by mortgaging your house, plot, gold, or FD, the bank is more confident. Such loans are approved quickly, and the interest rate is also lower. Unsecured Loans: Personal loans don't require any collateral, so banks are very strict about your profile and credit score.

Down Payment or Margin Money
Did you know that banks don't lend 100% of the value of anything?

Risk Management: You have to pay a portion (10% to 20%) of the car or house price yourself, and this is called the down payment.
Benefits: If you pay more money from your own pocket as a down payment, the bank feels that you are serious, and your loan is approved quickly.

Your Existing Relationship with the Bank
If you have an existing account with the same bank from which you are taking the loan, you get 'priority'. Many banks also offer 'Pre-Approved Loan' facilities to their old and good customers, where the money can be credited to your account in the blink of an eye without any documentation.

Take Loans Wisely
Taking a loan is not difficult anymore; you just need to maintain a disciplined financial profile. So, pay your bills on time, don't take too many loans, and keep a clear record of your income. Yes, if you keep these 7 things in mind, the bank will itself chase you to offer you a loan. (Note: This news is based on general information; for more information, please consult a financial advisor.)

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