Factors other than Credit Score that Determine the Approval of a Loan

It is a well known fact that keeping a healthy credit score is essential to getting an approval for a loan. Usually a credit score of 750 and above is considered to be good and a credit score of less than 750 is considered to be poor. Companies like CIBIL and Experian provide credit score free once per year on their website as it has been made mandatory by the RBI to do so. However there are factors other than the credit score that determine whether a person will get approval for a loan or not. The factors are:

1. The amount that will be paid as the down payment: While taking a loan, the sanctioned loan amount received by the borrower is a specified portion of the asset rather than the whole amount of the asset. This is known as the loan to value ratio and it usually varies based on the type of loan taken by the borrower. For instance, for a car loan, the loan to value ratio ranges from 85-95% of the value of the asset and for a home loan, the value ranges from 75-90% of the total price of the house. The down payment to be made depends on the lender’s policies as well and it is to be paid by the borrower from his or her own savings.
2. The number of loans already taken by the borrower: If any of the previous loans taken by the borrower are open and some amount is yet to be paid or the term period is long, the borrower will have difficulty in getting approval for the loan as this will prove to be a hindrance. On the other hand if the loans have been repaid in full by the borrower, then the loans will not prove to be a hindrance.
3. The income of the borrower: The income of the borrower is another important factor on which the loan amount that is approved is determined. Whether you are eligible for a loan or not also depends on the amount of money you make. It tells the lender about your repayment capabilities and also indicates the financial security the borrower has a person.  
4. The debt to income ratio: The debt to income ratio is also an important factor in deciding whether a person will able to get an approval for a loan or not. The debt to income ratio is nothing but the ratio of the income of the borrower to the debt amount that he or she owes. Usually, the debt to income ratio should not exceed 40%. If it exceeds 40%, the borrower could be facing problems in getting a loan for approval. The borrower has to also present the trend of monthly expenditure. This will tell the lender about the spending practices of the borrower.
5. Years of working or business experience: The number of years of experience the borrower has a professional or in business also determines whether the approval for loan will be granted or not. The longer the borrower has been working as a professional or running his or her business, the greater the chances are of the loan being approved.

Overall, the five factors mentioned above in addition to the credit score and the credit report determine whether the borrower will get an approval for a loan from the bank or not.