Applying for a loan? Know how your loan can be approved or denied.

Are you planning to apply for a loan? Yes, to meet various needs in life, it’s better to get a credit from the banks. People apply for a loan for various purposes like to have own house, to have a comfortable car, for higher education, for any personal reason etc. The days are gone when a loan was considered as ‘debt’, now banks have become very liberal to disburse loans to the consumers for various purposes. But on the other hand banks have become very cautious in sanctioning the loan of the applicant. Due to rise in number of defaulters in recent years, many loans have turned into bad loans and have created huge loss for the banks. Bank examines financial health, savings habits, paying potential and credit history of the applicant before sanctioning the loan. Applicant dream to own a house, car gets shattered when loan application is rejected by the bank. That time applicant thinks, “Why my loan has not been approved?” It’s very simple that bank does not want to sanction a loan which can turned into bank loan. Through this write up I would like to mention some steps required to take for an individual to maintain his financial health fit to get the loan approved without any resistance. These are some factors which decide your eligibility to get the loan approved –

Reflecting your earning – Whether you are working or self employed, you have to show your earning through bank transactions. There are lots of people who do cash transactions, hence their earning is not reflected in any bank and at the time of examining the income of the applicant, banks have no tool to calculate the actual earning. It is recommended for both working class as well as self employed people to do cashless modes of transactions like cheques, NEFT transfers in the banks so that there could be track of income of the applicant. If your income exceeds the tax payable slab, do file Income Tax Return (ITR). With this bank gets convinced with your consistent income and possibilities of getting the loan sanctioned rise.

Saving habits – Your saving habits gets reflected by your investments in fixed deposits, insurance policies, various government savings schemes, stock markets and other investments options in the market. If the applicant works in private sector, there can be fluctuation in the income of the applicant. So, bank’s concern is, in case of such situation, how the applicant will pay EMIs. Applicants who invest money in various financial schemes in the market are considered as safe to sanction the loan. Thus, make a habit of saving money through various schemes available with banks and other financial institutions.

Credit history – Your credit history include all transactions made by you since you are operating a bank account, using any credit card and paying any loan if availed. CIBIL – Credit Information Bureau (India) Limited is a credit information company which maintains data of all credit cards and loan users. If you ever have defaulted any payment of credit card bill or loan EMI, the information is sent by the bank to CIBIL and you become ineligible to sanction further loan unless the outstanding amount is paid. Even after paying the amount, you will be projected in the defaulters list thus will be a risky customer for the bank. This will hinder your chances in getting the loan sanctioned. This is advised to all not to default any payment of credit card or any loan EMI else it will be very tough for the applicant to avail loan in future. All banks examine CIBIL score before sanctioning the loan. If applicant’s credit score is less due to repeated defaults, loan will be denied by all banks.

Apply with co applicant – Your chances to get loan sanctioned will rise with a co applicant added with your application. Usually a working/earning spouse is added as co applicant but parents or children with regular income flow can also be added as co applicant. With co applicant, the primary applicant can add more income clubbed together with income of both applicants. Bank will approve file fast considering the loan sanction to be safe.

These are some ways to maintain you financial portfolio to get a loan approved from a bank without any problem. There are lots of people who are unaware of it and they get aware of it when their loan application is not approved. Hope consumers too become cautious as banks are.