If you are planning to raise a personal loan, it is important to remember that there are numerous factors that influence your ability to borrow.
Your potential to secure a loan is a function of your credit score, level of income, current liabilities and the loan amount. If one or more of these factors are stacked against you, then your personal loan application could find it difficult to sail through, and even face rejection.
Here, we give a lowdown on five of the key factors which adversely impact your ability to borrow money.
5 key factors that could adversely impact your ability to borrow
I. Credit score: At the outset, your credit score is quite important. The lower the score, the more difficult it is to borrow. Although a score above 720 is considered good, borrowers with lower than 600 credit score may find it difficult to borrow.
II. Debt-to-income ratio: Another factor that could negatively impact your ability to borrow is your high debt-to-income ratio. This means your debt portion already eats away a chunk of your income, leaving little or no scope to borrow money anymore.
III. Level of income: Aside from this, when your income is too low, your application could be rejected simply because the lender may believe that you would find it difficult to repay the loan.
IV. Amount of loan: Another reason lenders could reject your loan application is the amount of the loan. If the loan amount is too high, the lender may reject your loan application unless your income is also high enough to justify the loan amount.
V. Other miscellaneous reasons: There could be other reasons as well. For example, the age of the loan applicant is high, or your phone number is not linked to Aadhaar, or you have not filed your income tax return (ITR) in the past couple of years.
Disclaimer: Mint has a tie-up with fintechs for providing credit; you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit score. Mint does not promote or encourage taking credit as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.
