Sometimes, life throws up urgent financial needs, whether it's for wedding expenses, a medical emergency, home repairs, or repaying a debt. A personal loan is one of the easiest options. However, applying for a personal loan isn't enough; banks consider several factors before approving it. Learn more about them here.

1. Income and Job Stability
Banks first look at your income and employment status. If you have a decent salary and are working in a stable company, your chances of getting a loan increase significantly. If you've been working for the same company for at least two years, the bank considers you trustworthy. Loans become more difficult for people who frequently change jobs or have unstable incomes.

Example: If your monthly salary is ₹50,000 and you've been with the same company for 3 years, the bank will consider you a "low-risk" customer. However, if you change jobs every 6 months, the bank may hesitate.

Self-employed individuals must provide proof of income through tax returns (ITR), bank statements, or business proof.

2. Credit Score and Payment History
Your credit score (CIBIL Score) is of paramount importance to the bank. It's your financial report card. The better it is, the greater your chances of approval. A score of 750 or above is considered excellent. If the score is below 600, the bank may reject your application.

3. Existing Liabilities and EMI Load (Existing Liabilities & Debt-to-Income Ratio)
The bank also examines how much of your monthly income is already going toward EMIs or other debts. This is called the Debt-to-Income (DTI) Ratio.

If your DTI is between 40% and 50%, the chances of loan approval are higher. However, if more than half of your salary is going toward EMIs, the bank may hesitate to grant a new loan.

For example: If your net salary is ₹50,000 and your current EMI is ₹25,000, then DTI = 50%. This means that, according to the bank, you may face difficulty in obtaining a new loan. Therefore, if you are considering a personal loan, it's best to reduce your existing debts first.

4. Age and Repayment Capacity

Age also plays a significant role in personal loan approval. Most banks offer loans to applicants between the ages of 21 and 60.

Young people (25-35 years) can get a longer loan tenure (up to 7 years).

People aged 50 and above are offered shorter tenures because retirement is near.

For example, A 25-year-old applying for a loan of ₹5 lakh may receive a tenure of up to 7 years. However, a 55-year-old will only receive the same loan for 3-4 years.

5. Company Profile and Profession
Banks also consider your work environment. If you work for a large, stable, or government company, your application is approved more quickly. Banks also consider professionals such as doctors, engineers, chartered accountants, or government employees as trustworthy. Therefore, it is beneficial to highlight your company name, job profile, and professional degree while applying.

Disclaimer: This content has been sourced and edited from Zee Business. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.