Getting a loan may change someones life. But if an application is rejected, the dreams are shattered, and a single rejection will lead to problems in the future.
Conditions that can result in loan rejection
Banks draw their list of defaulters, and this information is available to all their branches. This information is looked into when a person applies for a loan. The information is then used in addition to the CIB score and the credit report provided by the CRB.
An applicant’s job is an important factor when applying for a loan. If the person changes jobs very frequently, it might be a negative point when applying for a loan. A stable income and employment record is very favorable when applying for a loan. The banks will have a positive outlook for people with a stable track record. The loan will be given based on a good employment track record since it gives the idea of stability in one’s life to the bank
Bad credit score
Among the conditions that can result in a loan, rejection is a bad credit score. The Credit information/referral Bureau shares the credit details of an individual with all the financiers. These details include information on a borrower’s present and previous loan transactions. Banks provide all the credit information on all the borrowers to the credit information bureau. Using this information, credit information bureau creates the CRB trans union score and the CRB score. CRB awards score based on the assessment of the information provided by the banks. Banks call for a CRB report as soon as a person applies for a loan
At some cases, people become a guarantor for the family members or friends. If you are a guarantor in case of default, then it will pose a problem. The CRB report will automatically show the person as a defaulter for the loan, even though the person was only a guarantor. One should be very cautious while giving his/her name as a guarantor
Too many loans
While lending money to an applicant, the banks will add all the existing outstanding loans from all the banks. This will help in determining the amount an applicant is eligible for. Then the ratio of loan to income is calculated by the bank before extending a loan.
Banks also make a thorough assessment of a tax profile by asking for the ITR copies of previous years including tax deducted at source/professional tax paid against the salary in the past. Not providing such information will lead to rejection. So its always best to obtain the right papers.