In our modern, fast-paced society, unexpected financial emergencies can catch us off guard, leaving us in need of immediate access to funds. Fortunately, there’s a revolutionary solution known as instant loan sanctioning, which allows individuals to get money instantly when they need it the most. This innovative approach simplifies the borrowing process by leveraging advanced technology and efficient procedures, enabling borrowers to secure funds without the usual delays associated with traditional approval methods. In this article, we’ll delve into the concept of instant loan sanctioning and explore how it empowers individuals to address their urgent financial needs with ease and efficiency.
Cracking the Code: Unveiling the 5 Factors Behind Loan Approval
1. Credit History
Your financial track record serves as a window into your future repayment habits, providing valuable insights into financial institutions. By analyzing your past loan settlements, your credit history helps banks determine whether you are likely to make timely and consistent payments. Instances of default or delayed payments are carefully examined, with the severity of the delay directly impacting your credit score.
Having no credit history can pose challenges when it comes to evaluation, especially if you haven’t utilized a credit card or taken out a loan within the past two years. However, you can overcome this hurdle by responsibly managing a credit card and ensuring that you never default on your payments.
Typically, maintaining your credit score in the range of 700 to 800 is considered positive, indicating that you are a trustworthy applicant with a clean repayment history, free from defaults. Conversely, a credit score below 300 significantly increases the likelihood of your application being rejected. Financial institutions rely on specialized credit bureaus, such as CIBIL, to obtain credit scores and gather relevant information for their assessments.
The significance of your age lies in its correlation with your financial stability. Upon embarking on your career in your twenties, you gain invaluable work experience, which accumulates over the span of five or six years by the time you reach thirty. This translates to a state of financial security, allowing you to ascend the metaphorical corporate ladder and enjoy improved salaries. As you advance through the following two or three decades, the number of earning years available to repay any loans decreases. Consequently, during your retirement years, attempting to secure a loan may face rejection due to this restricted timeframe for repayment.
When it comes to the approval of your loan application, the purpose for which you seek the funds plays a significant role. Lenders carefully evaluate the loan purpose as it helps them assess the risk involved and determine the likelihood of repayment. Whether you are applying for a mortgage, a personal loan, or a business loan, providing a clear and compelling explanation for how you intend to utilize the funds can greatly influence the lender’s decision. Demonstrating a well-defined purpose, backed by a solid plan and a strong repayment strategy, increases your chances of getting your loan sanctioned.
Your income serves as a crucial determinant of your ability to repay, as it reflects your financial capacity. When evaluating your income, banks take into account various factors like existing debts, dependents, income sources, and duration. A significant aspect that banks consider is whether you have a surplus after making your monthly EMI payments. If there is an insufficient surplus, the bank may assume that you are financially stretched and more likely to default. Conversely, if the surplus-to-EMI ratio is five times or higher, the bank perceives you as financially stable.
Additionally, many banks favor applicants who have filed their income tax returns and have paid taxes, rather than those who may have filed returns without any tax liability due to their income being non-taxable. Furthermore, demonstrating additional sources of income, such as your spouse’s salary, enhances your eligibility and indicates a stronger repayment capacity, as it provides access to multiple income streams. Joint loans are often offered for this reason, as combining the monthly salaries of both the applicant and co-applicant results in a higher overall income, enabling a higher loan amount to be afforded.
Having substantial collateral when applying for a loan can greatly enhance your chances of obtaining it swiftly and effortlessly. The loan amount typically corresponds to a percentage of the collateral’s assessed value, implying that possessing a high-value asset could lead to a larger credit sanction for your specific needs. These assets can be either immovable, such as land or a house, or movable, including vehicles, inventory, equipment, investments, gold jewelry, and other valuable possessions. While personal loans and credit card outstanding balances, are typically unsecured, securing approval for loans related to purchasing a car, a home, starting a business, or pursuing education necessitates adequate collateral.
Securing a loan can be a daunting task, but understanding the factors that determine whether your loan gets sanctioned can help increase your chances of approval. The five key factors includes credit score, income and employment stability, debt-to-income ratio, collateral, and purpose of the loan. It’s important to take the time to assess your financial situation and address any potential issues before applying for a loan. Make sure you have all the necessary documents in order and choose a lender that fits your needs. Remember, being proactive and informed is key to getting your loan approved.
Tanvi Kaushik specializes in Content Marketing and works with the Digital Team at KreditBee – India’s fastest personal loan platform where self-employed and salaried professionals can easily avail of personal loans in just a few minutes when in need of quick funds. Tanvi writes to-the-point articles on personal finance and budgeting which are truly appreciated by her readers. She is committed to making money matters easy to understand even for the layman. Her commitment to her work doesn’t stop her from pursuing her hobbies of hiking, trekking and going on adventurous trips.
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