Why don't two people with the same salary get the same loan amount? What do banks check?

Loan Eligibility: If you are planning to take a loan, you should know that banks do not offer the same loan amount to everyone. Therefore, there are certain important factors to consider before applying; only then will the bank approve your loan.

Loan Eligibility: Rising inflation has made life difficult for people. It is no longer easy for an average person to meet all their family's needs relying solely on their salary. Consequently, people often consider taking a bank loan when the need arises.

However, people often assume that if two individuals have the same salary, they will receive the same loan amount—but this is not the case. When approving a loan, banks do not look at salary alone; they assess various other crucial factors regarding both applicants and make a decision based on that. Therefore, it is incorrect to assume that an identical salary guarantees an identical loan amount.

Banks look at repayment capacity, not just salary

Before granting a loan, the bank assesses whether you will be able to pay the EMIs in the future. To determine this, the bank examines various financial aspects to gauge the borrower's ability to repay the loan.

Job stability is also assessed

Additionally, the bank considers how long you have been employed in your current job. If a person has been working for the same company for a long time, the bank views their income as more stable. Conversely, someone who frequently changes jobs may be perceived as a higher risk.

Banks also check your CIBIL score

A good CIBIL score indicates to the bank that you have repaid previous loans on time. Keep in mind that a score of 750 or higher is considered good. If your score is low, the bank might refuse the loan or offer an amount lower than what you require.

Existing EMIs also have an impact

The bank also checks whether you have any outstanding loans or purchases made on credit (such as EMI-based purchases). Additionally, the bank will assess how much of your monthly salary goes towards EMIs for any existing loans. If you are already servicing loan EMIs and have outstanding credit card dues, the bank may perceive your loan repayment capacity as low. Consequently, securing a loan could become difficult. This is why two individuals with the same salary might be offered different loan terms.

Keep these points in mind before taking a loan:

Check your credit score first.
Avoid applying for loans with multiple banks simultaneously.
Keep your monthly EMI within a manageable range relative to your salary.
Borrow only the amount you actually need.
Read and understand all the terms and conditions before taking the loan.