Significant Factors Lenders Consider When Approving Your Application

• Credit Report

  The credit score is critical in determining whether the lender will proceed with your application or reject it at the initial stage. This is especially true for unsecured loans. Because a credit score represents the borrower's credit history, the lender analyses the borrower's repayment history and determines whether the borrower can repay on time or default on payments. The lender's decision about loan approval is based on the results of the necessary analysis.

• Employment and Income History

  Additionally, your monthly or annual income and employment history are critical factors in a loan acceptance. The lender may or may not be convinced that you will be able to repay the loan based on your income and income stability demonstrated by continuous and steady work history.

• Debt-to-Income Ratio

  Not only is a healthy income necessary, but so is a healthy debt-to-income ratio. If your monthly income is less than Rs.1 lakh and your debt repayment obligations already exceed Rs.75,000, you will be denied a new loan since you will require the remaining income to meet your household costs.

• Collateral

  The lender may determine the interest rate on your loan based on the collateral you offer and its current market worth. Collateral increases the lender's sense of security, resulting in increased trust and a lower interest rate. Unsecured loans are notorious for their higher interest rates.

• Down Payment

  The money you've saved and the effectiveness with which you've implemented your down payment savings strategy will boost the lender's faith in you—the greater the down payment, the smaller the required loan amount.