Kavya exceeded her wedding budget and needed another lump sum to cover the costs. Since it was beyond her credit card limit, she decided to apply for a Marriage Loan from a reputed lender. She had a stable job, so what could go wrong?
Believe it or not, a high salary is not going to compensate for your low credit score. If you have a pending loan application, let’s understand the parameters lenders look for.
Read to discover the top 6 things that can reject or pass your Personal Loan application.
Reasons why lenders reject Personal Loan applications
1. Low credit score
Your credit score plays a critical role in your loan application. Maintaining a good credit score shows lenders that you are responsible and can be trusted with on-time repayments.
For example, Sam bought a TV and paid all the EMIs on time. This not only improved his credit score but also made him eligible for Personal Loans.
Sadly, for Kavya, her past behaviours have reflected on her score. Lack of financial planning made it difficult for her to opt for a Marriage Loan.
2. High DTI ratio
The DTI Ratio refers to the ‘debt-to-income’ ratio. This helps you compare your income with your recent financial obligations. Lenders always look for people whose income is enough to repay the borrowed amount.
Therefore, it is important to keep your debts manageable and to pay your EMIs on time. Also, make sure the EMIs do not take up a large share of your income.
3. Low income
A low income will likely affect a Marriage Loan or any other type of loan. For instance, if your monthly salary is 12,000 and you need a Personal Loan of one lakh with an EMI of 10,000 per month, it might be difficult to get approved for the loan.
Your income directly indicates your ability to repay the debt. Therefore, before applying for an educational or Marriage Loan, make sure your income meets the eligibility criteria. Or at best, be ready with collateral.
4. Unstable employment
While you might get a decent hike every time you switch jobs, remember that it doesn’t leave a good impression on lenders. Switching multiple jobs is an indication of instability.
Banks and other lenders look for people with stable jobs as they reassure them that you are a responsible person. Maintaining a work history with a reputed organisation indicates steady income and helps you get your Marriage Loan approved quickly.
5. Multiple loan applications
When you apply for multiple loans within a short period, it is considered a ‘hard inquiry’ by lenders. These are often considered credit greed.
Apply for loans strategically. Instead of submitting multiple loan applications at once, check if you are eligible for the loan and apply to the lenders that best match your requirements. Applying for loans only when necessary helps you maintain a strong credit profile.
6. KYC issues
Accurate KYC documents are very important when you plan to apply for a Marriage Loan. Suraj was a responsible person with a good credit score and a decent salary. However, a slight difference in the spelling of his surname made it a huge deal in his loan application process.
Therefore, before you apply for a loan, check that your KYC is in order and that all your documents are up to date. Make sure that there are no mismatches. Carefully scrutinise your documents before submitting your loan application.
Final Thoughts
Applying for a Personal Loan, whether it is for education, marriage, or other requirements, is easier when you prepare yourself in advance. Make sure that you maintain a good credit score, manage your debts and income carefully, and ensure that you have a stable job.
Always keep your documents up to date, as this will improve your chances of getting approved for a loan. By understanding lender requirements and planning your finances, you can apply for a Personal Loan with confidence.
Be First to Comment