In this modern world everyone are living on loans, Individuals borrow, Business borrow, even Countries borrow.
Most of us borrow on one occasion or the other occasion.
We need loans for buying a dream home, a car, health, marriages or for education.
In this article we will restrict only for individuals.
If you ask for a loan the first thing the banker looks is whether you have enough cash flow and capacity to repay the it.
Then comes your credit history, how good are your earlier repayment tracks, what are the other commitments you have, what is the purpose of loan and your profile.
If your income does not support the EMI there is a very little chance that the banker will approve your loan.
The EMI must be in your means.
If your income is not eligible you have to go for a smaller loan or go for a longer tenure, where the EMI will be less.
If you have any other loan obligations the best way is to clear them if the outstanding loan amount is less.
Few bankers also take over the existing loans, so allow the bank to take over the other loans where the outstanding is less, this way you may be eligible for higher loan amount.
But the worst scenario for any loan rejection is CIBIL problem, if there are any cibil problems then the loan application will be rejected.
The main CIBIL problems are related to your earlier loans, credit cards.
If you have defaulted the payments in any of the earlier loans or settled the earlier loans or credit cards then they will have a negative impact on your credit rating.
Even late payments of loans and cheque bounces will have a negative rating.
So one has to take enough care when taking any loan, so that he can repay the entire loan, in case he defaults in repaying that loan, then getting any loans in the future will be very difficult.
The purpose of the loan is also important for the banker.
Say if an individual is asking for a mortgage loan, the banker should be satisfied the purpose for which the loan is taken, then the profile is also important.
Most bankers maintain list of negative profiles for which they will not lend.
Some banks also have negative area lists.
Banks need to be convinced for lending to negative profiles and for people residing in negative areas.
Most banks are also not lending to bachelors not staying with their parents and staying in bachelor rooms or hostels.
The best thing is if you are planning to take a loan you need to plan for it for any where between 6 months to 3 years.
If you think it is too long a period then you should always be prepared as you don't know when you need a loan.
Why 6 months to 3 years? Bankers will look at your average balances in the bank for the last six months and in some cases for one year, they check the bank statement for any cheque bounces during that period, loan commitments for the last six months and any nes loans taken in recent period.
For loans like home loans they also look at the last 3 years incomes.
Residence stability is also very important.
The banks see since how long the customer is residing in the current residence, the longer the more beneficial, similar is the job stability.
Current job experience should be more than 1 year at least more than six months.
Maintain average bank balance of 1.
5 times the planned EMI, see to that there are no cheque bounces, no late payment charges for the credit cards.
For all these reasons, depending on the type of the loan you take, I recommend you to plan for 6 months to 3 years or best way is to always be prepared.
Documents are also important.
Pan card is must for any loan above Rs.
50000.
Residence proof preferably in the name of the borrower is important.
The best is a land line telephone bill.
Previous employment letters, form 16, previous loan tracks.
Any settlement letters (must be preserved) for previous loans and credit cards.
In case of bad credit you can start fresh by taking a secured loan, most people give loans for secured loans like mortgage loans, car loans and home loans but unsecured loans are very difficult to come if you have a bad credit rating.