According to the experts, there was a dramatic increase of $30 billion between July 2019 to August 2019 in personal loan amounts. Notably, this also happens to be the time when Pandemic was at its peak and most of the global economies were at a halt.
When you apply for a personal loan, regardless of the amount or the institution, there are certain outlines eligibility checks in place. The lenders need to know if you can repay the loan without fail.
The foremost and the most important checks of all is your credit score. According to the experts at Plenti, a credit score is a three-digit number that indicates the legitimacy of a borrower.
Also, it is noteworthy that a good credit score means easier loan availability and that too at a lower interest rate. But, at the same time, the credit score alone cannot get you a loan.
Personal loan lenders also scrutinize through your credit history. In other words, a lender would go through your financial history, dig out what loans have you taken out in the past.
Some lenders also like to know about your personal savings and assets. If you have a low credit score, it is very likely that a lender would be interested in knowing about your assets. This is because, based on the value of your assets, your loan application may be approved.
The amount of your personal loan that is approved also depends on your income to a large extent. However, your monthly income is only needed to decide the amount of loan that you are eligible for.
To understand how your outstanding debts help decide your eligibility let us take an example. Let’s say you owe a home loan for about $100,000, on top of a car loan for about $50,000. If you have been making regular repayments, then your credit score and history will reflect a good score.
If you’re applying for another loan of $10,000 then you need to produce enough proof that you can bear another instalment cost. On top of it, you’ll also need to state your monthly expenses including food, utility bills, grocery bills, and any other maintenance costs.
With all these checks in place, understanding how exactly a lending institute approves or declines your application is rather easy to understand. However, it is noteworthy that even if you have everything good and glittery on your scorecard, your application might still be rejected.
Despite having a good credit score, zero outstanding debts, and sufficient savings and assets, your personal loan application also has to pass a few other conditions.
Applying for a personal loan could seem like the perfect answer to all your financial woes, but at the same time, ineligibility could further worsen the situation for you. Therefore, it is rather important to take care of your eligibility factors and apply only when you need money direly.