All the credit facilities extended by the commercial banks, NBFCs, lending institutions and other related microfinance companies to the different individuals are decided on several factors.
New Delhi: All the credit facilities extended by the commercial banks, non-banking financial entities, lending institutions and other related microfinance companies to the different individuals are decided on several factors. The variation in applicable interest rates, processing charges, credit amount, repayment tenure, equated monthly instalments (EMIs), penalties on default on repayments is largely dependent on these factors.
An individual planning to take a home loan has to keep several ready according to the prescribed and accepted measures by the lending institutions and banks. The eligibility of a person is the first step in granting a home loan or a personal loan.
Here are 5 factors that can affect home loan eligibility
Credit score issued by the credit profiling companies is the first and foremost filter which is assessed thoroughly before granting any kind of credit facility to a person, be it a loan, overdraft or a credit card. The credit score of an individual is derived from the credit utilisation ratio, repayment history, existing liabilities and timely payments of bills.
The cumulative income from all the sources is another key thing which is taken into account before extending a home loan as total income, multiple sources and the nature of the industry in which an individual is operating reflects the repayment capacities. A person earning a lakh rupee from multiple sources such as Rs 50,000 from salary, Rs 30,000 from rental income and Rs 20,000 as interest income is preferred over a person earning Rs 1 lakh from a single source for granting a loan.
The present age at which the individual is planning to take the home loan becomes another factor which affects the home loan eligibility. The bank and other lending institutions may refrain from granting a loan or a credit facility to a person in age closer to retirement as compared to a person in his late 40s and early 50s.
Existing debt burden and the frequency of defaults in the repayment cycle sharply affects the home loan eligibility. The home loan application of a person with two to three ongoing loans such as education loan, vehicle loan and credit card debt will get rejected by the banks and lenders. From a bank’s perspective, such individuals are considered incapable of servicing repayments of another credit facility.
Employment status is a prime factor which is considered by all the lending institutions. A person with unstable employment history or dependent on seasonal employment opportunities is unlikely to repay the loan on time. A person with a stable and permanent employment history is preferred more.