No one can deny the fact that loans are one of the greatest concepts that man has ever come up with. It is very much evident that loans have played a great role in most of our lives. For many, it has helped to realize the dreams.
All good things happen after a lot of struggles and loans are not an exception. You need to go through a lot to get your loans approved. The banks take into account a lot of parameters before sanctioning the loans. In this article, we will see some of the factors that will affect the loan approval.
The outstanding balance that you have will definitely be a huge hurdle for loan approval. It is because it will have a significant negative impact on the credit score. Moreover, the information will be used by the lenders to determine the credit utilization score. It is the ratio between the credit limits and outstanding balances. It is very high in case of home loans and term loans. It is better and safe if you can maintain the ratio at 20% to 30%.
The history of your loan repayment plays a very important role when it comes to loan approval. It conveys a lot of information to the lenders. In the current situation, all it takes is a few clicks for them to know your repayment history. If you have been perfect, then it is a green signal. If there are has been some delay, it can be accepted up to a certain level. But if you have a bad history, there are possibilities that your loan will not get approved. To avoid these kinds of things, it is better to repay the loans properly.
Types of credit
There are two types of credits. They are secured credit and unsecured credit. The lenders will take into confederation the ways in which you have repaid your secured and unsecured loans. They will give more importance and weight age to unsecured loans like credit cards and personal loans. Even though loans with liabilities like home loans are considered they do not as much importance as the unsecured loans.
The loan is the report that furnishes the complete history of the loans. It gives providers all the information like the type of loans that you have taken, your repayment history, the interest rate and a lot more. The new borrowers who have a credit history of fewer than six months will get a -1 rating. The easiest way to tackle this issue is to build a proper credit history for six months.
New recent credits
The bank will take your credit enquires very seriously. They can easily get all the investigation made on your account. The quires are absolutely fine if they are for home loans because banks will understand them. But fit is for credit cars or personal matters then there are possibilities that your loan might not get approved.