Don't get rejected! 5 essential things to know before applying for a personal loan

New Delhi (Uttam Hindu News): Whether it's the festive season or an emergency, a personal loan often seems like an easy solution. However, applying for a loan without complete information can not only result in your application being rejected but also negatively impact your credit score. Banks and financial institutions (fintech companies) evaluate your profile on certain key parameters before granting a loan. By knowing these things in advance, you can not only increase your chances of loan approval but also benefit from better interest rates.

Let us know the 5 main things on which banks pay the most attention:

1. Stability of your salary and income

Any bank or company will first want to ensure that you have a regular and stable income to repay your loan. The higher and more stable your monthly income, the greater your chances of loan approval. If you've been employed at the same company for 1-2 years, this is considered a positive sign. Self-employed individuals may need to submit tax returns and other financial documents to prove their income.

2. Credit score is the most important

Your credit score plays a crucial role in personal loan approval. A credit score of 750 or higher is considered very good, as it indicates that you have made timely payments on your past debts. If you have any defaults, late payments, or a high number of recent loan applications, your application may be rejected.

3. Existing debts and liabilities 

Banks also examine how much of your monthly income is already going toward existing EMIs. This is called the debt-to-income (DTI) ratio. If more than 40-50% of your income is already going toward EMIs, it can be difficult to get a new loan. Therefore, it's wise to pay off older, smaller debts before taking out a new loan.

4. Age and repayment capacity

Your age is also an important factor in loan approval. Younger applicants are considered less risky because they have a longer working life to earn. Banks typically prefer applicants between the ages of 21 and 60. The loan repayment period is also often determined based on your retirement age.

5. Where do you work (employer profile)

The company or organization you work for also has a direct impact on your loan application. Employees working in reputable, stable, and large companies are more likely to have their loan applications approved faster. Furthermore, professionals such as doctors, engineers, or chartered accountants (CAs) are considered more trustworthy by banks and are more likely to receive loans.