Top things to watch out for while securing loan

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In today’s fast paced world there is no predictability as to what life may throw towards you. In order to be prepared for all pleasant and unpleasant surprises that may be in store for you, financial backup is required. While saving for such uncertainties is certainly the best way to go about this, there could be instances where you need amounts over and above your saved up corpus. Loans are financial products that come in handy at such times of financial need.

Banks and other financial entities offer loans to customers for a variety of financial requirements. These include home loans, education loans, personal loans and auto loans. While availing loans seems to be an easy route towards solving a number of financial urgencies, securing one isn’t necessarily a cake walk. With banks tightening up their eligibility criteria, there are a lot of things that you need to be careful about in order to qualify for credit. Let us look at some of the topmost but unusual requirements that banks generally evaluate applicants on before sanctioning their loan.

1. Ability to repay loan


Whenever a lender lends money to you, the first thing that he/she will want to confirm is your capacity to repay the borrowed amount. Your monthly income is a good indicator of your repayment power. Existing loans and debt liabilities are also taken into account by lending entities before disbursing loan amounts to borrowers.

2. Status of the industry in which you work


The industry which employs you currently also plays a major role in determining your loan amount. This is because any slump in the industry is bound to affect your job status as well as salary structure. And hence, lending entities look at the stability of the industry too while sanctioning loan applications. For example, for a software engineer applying for home loan in Malaysia, banks are most likely to check on the IT industry status in Malaysia as well as the current performance of the software company that employs him/her.

3. Collateral that is pledged as security


Collateral is any resource that is pledged as security in order to compensate for bank’s loss in case the borrower defaults in loan repayment. Most popular physical collateral’s include vehicles, property, gold etc. Banks check the authenticity of collateral papers that are submitted by loan applicants in order to avail loans. In case of unsecured loans, collateral’s are not required. However, for unsecured loans the rate of interest charged is thus, more than that charged from customers on secured loans.

4. Credit Source


Credit source is checked mainly for loan applicants who are looking for credit to set up their own  business. The lending entity or bank reviews the applicant’s business plan and fund structure to determine how responsible is the applicant and whether he/she will be able to repay the loan amount. Lenders usually check the profit and loss report, structure of capital and return on investment statuses of enterprises. This enables lenders to get a fair picture of how the repayment pattern for a particular loan borrower may look like in future.

5. Review of applicant’s character


Although it sounds unusual, but lenders do check on the basic character of loan applicants via informal channels. In today’s age of Facebook and Twitter, social platforms are leveraged by banks and other lending institutions to gain an insight into the family background, spending habits and hobbies of loan applicants. These platforms are also good channels for determining the education and job backgrounds of loan applicants.
With the above points in mind, loan applicants can improve their chances of securing not just credit but loans that are faster and at lower rates.


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