Your credit score is a three-digit numerical reflection of your past behaviour regarding the repayment of credit. It plays an important role in the form of a parameter to evaluate your creditworthiness, as well as a basis for risk-based pricing by lenders and is gradually becoming a part of an applicant’s background check during the recruitment process as well.
But despite having a high credit score when you performed the task to check credit score, a borrower still needs to meet the following five important characteristics in order to prevent the application for a loan from being denied:
Borrower’s age
When determining whether or not you are eligible for a loan, the lender will take into consideration both your current age and your anticipated age at the conclusion of the loan term. The approval of a loan is typically denied to individuals who do not fall within the minimum and maximum age brackets that have been defined by the lender. Applicants who are getting close to retirement age typically have a more difficult time getting their credit application approved. This is due to the fact that lenders typically prefer that loan repayment be completed prior to the time the borrower retires. This is because the borrower’s regular inflow of income will either stop or significantly decrease after retirement.
The inability to meet the minimum income eligibility requirements
The minimum income criteria are one of the first filters that lenders use when assessing whether or not you are eligible for a loan after checking the commercial cibil report. It is typically determined by the borrower’s geographical location, taking into account whether they live in a metropolitan, urban, semi-urban, or rural area. If you don’t make at least the required amount of money each month, your application for a credit card or a loan can be immediately denied, and this could happen even if you fulfil all of the other eligibility requirements, such as having a good credit score upon going to check credit score or being of a certain age.
Due to the fact that the minimum income requirement varies from one lender to the next despite the presence of a strong commercial cibil report, it is in your best interest to visit an online financial marketplace. This will allow you to easily compare and select from the numerous loan options and potential lenders who will provide offers according to your eligibility as well as your specific monetary requirements. To improve your total eligibility for the loan as well as your chances of getting it approved, you might also want to think about adding a co-applicant. Make sure, however, that the income of the co-applicant is sufficient and consistent in addition to meeting the other essential eligibility criteria established by the lender.
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A very high EMI to income proportion
This is a lesser know but vital aspect that rejects your loan application even if your score was high when you did check credit score. EMI to income proportion refers to the percentage of your overall income that goes toward paying off debts such as loan EMI (including the EMI for the new loan), credit card bills, and other similar expenses. If an applicant’s EMI to income proportion is greater than 40 percent to 50 percent, it is possible that their loan application will be rejected. Lenders normally prefer to lend money to applicants whose EMI to income proportion falls between the range of 40 percent to 50 percent.
If your ratio is higher than this range, you might want to think about prepaying some or all of your existing loans. Doing so would bring down your EMI to income proportion and, as a result, increase your loan eligibility. You might do this in whole or in part. You also have the option of selecting a longer repayment tenure for the new loan, which will result in a reduced monthly instalment amount (EMI), provided that the EMI to income proportion (which includes the EMI for the new loan) is maintained at or below the required level. However, keep in mind that because a longer-term means higher overall interest costs, you should aim to make prepayments whenever you have surplus cash because this will minimise the total interest payout. Prepayments can be made whenever you have extra money. Also, remember that you can see a summary of all loans and EMIs when you check your commercial cibil report.
Job description and security
When determining whether or not to provide you credit, many financial institutions take into account the nature of your work, its stability, and the profile of your employer. Lenders may have a tendency to prefer lending to those working in the government sector or with top corporates and MNCs because there is a higher presence of job certainty among those working in either of those sectors.
This is in comparison to those working with companies that are either less well-known or financially struggling. Due to the higher degree of risk that is there, candidates who are engaged in dangerous work profiles may have a reduced likelihood of having their loan application approved. Lenders may view frequent job-hopping as an indication of an unstable career and inconsistent income.
Being a co-signer on another person’s loan
If the primary borrower or borrowers don’t pay back the money they owe on the loan, and the same is even reflected in the commercial cibil report, the guarantor is responsible for making up the difference. Becoming a guarantor for someone else’s debt makes you jointly accountable for the repayment of the loan. As a result of the fact that lenders count the remaining balance of a guaranteed loan as a contingent liability when determining the guarantor’s ability to make payments, the guarantor’s eligibility for a loan is diminished to the same degree, which increases the likelihood that the loan will be declined.
Before agreeing to serve in the capacity of a loan guarantor, it is essential to make it a habit to carefully evaluate the likelihood that you will require financial assistance in the near and intermediate terms. A delay or default in the repayment of the guaranteed loan would have a negative impact when you check credit score and commercial cibil report of both the primary borrower(s) and the guarantor. Therefore, it is essential to regularly monitor the repayment activity in the guaranteed loan account while the guaranteed loan is still being repaid.
