In recent times, availing a loan is as easy as blowing a candle from a cake unless and until if you have a good credit history. However, CIBIL is a key factor for getting approved for any loan but there are several other factors which are really significant to take a loan for handling any financial emergency. In this blog post, we have jotted down some of those factors which are required to be in hand before you "Apply For Loan" besides a good credit score.
Debt to income ratio: Along with your credit report, your income and debts acquired by you plays a major role to get an access to any kind of loan service. Lender must check your debt to income ratio to have an idea about the bridge between your monthly income and debt obligations. If the ratio rises to 40% of your gross income then lenders won’t lend you money for your needs as you are declared to be overburdened with debt and a new loan might impact your financial situation adversely.
Employment history: Besides CIBIL and debt to income ratio, the next eligibility criterion a lender would ask is your employment history to check your repayment capacity. A track record of more than two years in a particular organization reflects your professional stability which is strongly preferred by the lender.
However, if you have a record of switching your jobs one after another then it could be a cause of concern for the lender and your chances of loan approval get lower down because of unstable financial behavior.
Monthly earnings: Your monthly income is also a crucial component in credit and loan approvals. Likewise your employment history where your stability is honored, your monthly earnings also assure the lender that you are able of paying your loan installments and other financial obligations on time. If a particular lender is not satisfied with your gross monthly income, he/she will assign you as a higher credit risk, therefore rejects your loan application.
Cash flow: No matter what, but every lending institution needs an assurance that you can easily repay your loan installments even if you are laid off. Here, your cash flow comes into play and lender wants to know about your personal as well as financial assets that can be used to cover your loan debt in case of any financial setback. Hence, it means if you have more liquid assets such as stocks, investments or other deposits, you are more likely to repay your loan on time.
Emergency Funds: If you have ample amount of money in your savings account then you can easily qualify for lowest possible rates of interest when you "Apply For Loan Online" or offline.
Lending institution want to ensure themselves that you have enough of savings despite of what you are paying every month for your utility bills, taxes and insurance premiums, closing costs etc. In addition to that, if anyone suffers any temporary reduction in monthly income, he/she will be able to repay the EMIs with the savings in your emergency fund.
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