The concept of earning and spending has reconstructed over the years. The new-age millennials have given a new outlook to the way they desire to lead their lives. Spending on lifestyle and accomplishing big dreams has become a priority to the millennials but to achieve them, everyone needs resources too. This can be accomplished by applying for a personal loan.
To meet the requirements of millennials, lenders have also introduced various types of loans to meet their needs at every stage of life. There are various factors like eligibility, availability and affordability which are to be considered while applying for a loan. To help you minimise the chances of your loan rejection, this blog shall discuss on some of the parameters that most of the lenders consider while approving your personal loan request:
- Know your customer (KYC) – This is the most crucial stage where your lender tries to gauge maximum information about you through the submission of your documents such as PAN card, Aadhar card, bank statement and residence proofs. These documents can help your lender determine your authenticity. The requirement of KYC documents may differ from one lender to another but it is always advisable to maintain these documents and submit them when requested.
- Income – This is another factor which helps in approving your loan request. Generally, most of the lenders pre-set the minimum required income on their website. But in addition to income, there are other parameters such as nature of employment, FOIR (Fixed Obligation to Income Ratio) and DTI (Debt-to-Income ratio) which is considered while approving your loan.
- Your lender must know how stable your monthly income is because your income shows the stability of funds. This can thereby help your lender to determine your repayment capacity.
- Your DTI defines your ability to manage your liabilities and monthly expenditure to your monthly earnings. A healthy ratio of 30% to 50% highlights your ability to manage your debts wisely while saving a little amount after the basic expenses are taken care of, as this helps in determining your creditworthiness.
- FOIR is another method to determine how much debt you can handle. This method includes your fixed liabilities and other variables like credit card payments and rent components. If your FOIR is around 40%-50%, then there are higher chances of getting your loan approved.
- Banking – Your lender will cross-check your banking records to examine your bank statements and analyze your income and expenditure patterns based on your bank records.
- Credit score – CIBIL score plays a major role in determining your loan approval. It is a 3-digit number which is determined based on your credit history. Make sure that your credit records are up to date as they determine your credit score. A healthy CIBIL score must be 750 and above which showcases your ability to repay your debts on time. With a good credit score, you not only get approved for a higher loan amount but also get approved for a low-interest rate loan.
- Contactability – It is always advisable to provide legal and complete information about you to your lender. Your lender will be communicating with you for multiple instances regarding loan agreement, EMI payments or submission of any documents. So, make sure that you submit proper documents and requested information, before applying for a loan.
The above-discussed points indicate that a proper understanding of the stages of the application process is mandatory so that you can avail a personal loan of your choice based on your requirements. So, if you are in dire need of cash, then apply for an instant personal loan with top lenders.