Your credit score is a three-numeric representation that shows how you have handled paying back credit in the past. It plays an important role as a way to measure your creditworthiness and as a way for lenders to set prices based on how risky you are. It is also slowly becoming a part of background checks for job applicants.
But even if you had had a cibil dispute before and managed to get to a good credit score thereon, as a borrower, you still need to have the following important things in order for their loan application not to be turned down:
Age of borrower
When deciding if you can get a loan, the lender will look at both your age now and what your age will be at the end of the loan term. People who don’t fit into the minimum and maximum age range set by the lender usually can’t get a loan. Most of the time, it’s harder for applicants who are getting close to retirement age to get their credit application approved. This is because lenders usually want loan payments to be finished before the borrower retires. This is because, after retirement, the borrower’s regular income will either stop or drop by a lot.
Not being able to meet the minimum income requirements for eligibility.
After looking at your commercial cibil score, one of the first things that lenders look at to decide if you can get a loan is your minimum income. It is usually based on where the borrower lives. If you don’t make at least the minimum amount of money as income, your credit card or loan application could be denied right away. This could happen even if you meet all the other requirements, like having a good credit score and getting any pending cibil dispute resolved timely.
Since the level of minimum income required tends to vary from lender to lender, even if you have a good commercial cibil score, it would be best for you to go to an online financial marketplace. This will make it easy for you to compare and choose between the many loan options and possible lenders who will make offers based on your eligibility and your specific financial needs. You might also think about the step of adding a co-applicant to increase your chances of getting the loan and the amount you can borrow. Make sure, though, that the co-income applicant’s income is sufficient and stable, as well as meeting the other important eligibility requirements set by the lender, and that he or she doesn’t have any ongoing cibil dispute.
A very high ratio of monthly payments to income
This is a less well-known but very important reason why your loan application will be denied, even if your credit score was high when we checked it. EMI to income proportion is the amount of your total income that goes toward paying off debts like loan EMI, bills of credit card etc. If a person’s EMI is more than 40 to 50 percent of their income, it’s possible that the submitted application can be turned down. Most of the time, lenders like to lend money to people whose monthly payments are between 40 and 50 percent of their income.
If your ratio is more than this said range, you may go ahead to pay off some or all of your loans early. If you did this, your ratio of EMI to income would go down, which would make you more eligible for a loan. You could do all or part of this. You can also choose to pay off the new loan over a longer period of time. This will result in a lower EMI as long as the ratio of EMI to income, which includes the EMI for the new loan, stays at or below the required level. But keep in mind that a longer term will cost you more in total interest, so you should try to make prepayments if you have extra cash. This will lower the burden regarding the overall amount of interest you need to pay out. When you have extra money, you can make a down payment. Also, remember that when you check your commercial cibil score, you can see a summary of all your loans and EMIs.
What a job entails and how safe it is
Many financial institutions look at the type of work you do, how stable it is, and who your employer is when deciding whether or not to give you credit. Lenders may be more likely to give loans to people who work for the government or for top corporations and multinational corporations (MNCs) because those jobs are more likely to be stable.
This is in contrast to people who work for companies that aren’t as well-known or are having trouble making money. Due to the higher level of risk, candidates whose jobs are dangerous may have a lower chance of getting a loan. Lenders may think that switching jobs often is a sign of an unstable career and a fluctuating income.
Putting your name as guarantor on someone else’s loan
Besides the common reasons like low score, ongoing cibil dispute etc., being a guarantor too can damage your score and credit profile. If the main or co-borrower doesn’t have a timely payback of the money (EMI) they borrowed and it shows up on their commercial cibil score, the guarantor has to make up the difference. When you act as a guarantor for someone else’s debt, you are also responsible for making sure the loan is paid back. Because lenders count the remaining balance of a guaranteed loan as a possible liability when figuring out the guarantor’s ability to make payments, the guarantor’s loan eligibility goes down by the same amount, making it more likely that the loan will be turned down.
Before you agree to be a loan guarantor, you should make it a habit to think carefully about how likely it is that you will need financial help in the near and medium future. If the guaranteed loan wasn’t paid on time or wasn’t paid at all, it would hurt both the primary borrower(s) and the guarantor’s credit score and commercial cibil score. So, it’s important to keep a close eye on what’s going on in the associated account of the loan, which was guaranteed.
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