Credit rating is a primary indicator of credit worthiness. A good credit rating is considered important in obtaining loan approval from any bank or other financial institution. But sometimes, despite having a good credit rating, the loan application can be rejected.
This is because lenders may also consider other factors in lending money.
“Lenders work with external data sets (utility bill payments), mobile data (usage information) and revenue sources (bank statements) to determine creditworthiness and repayment risk factors regarding existing and future customers, â€says Bala Parthasarathy, CEO and Co-Founder, MoneyTap.
“Even without a credit history for new customers to credit (NTC), loan companies are using data analytics and AI, ML to expand their services to a larger segment of people who don’t ‘were not previously served by traditional financial organizations, â€he said. added.
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Here are some of the factors that lenders may consider apart from the credit score:
Monthly income
This is the most important criterion for the selection of loan applications.
“The lender evaluates the repayment capacity taking into account income, the stability of the source of income, the number of dependents, etc. Suggests Pranjal Kamra, Managing Director of Finology.
IME / income ratio
This is another aspect taken into account when approving a loan application.
“The chances of getting a new loan approval are higher if the borrower’s total existing EMI repayment amount is much less than 50% of their monthly salary,†Parthasarathy explains.
Age
The age of the borrower is taken into account in determining financial stability and the length of the loan. Often, people of an older age bracket (over 60) are not approved for a loan, according to Kamra.
Professional experience
Most banks and NBFCs require a minimum of two years of professional experience to minimize the risk of default.
Job changes
Frequent job changes are seen as a sign of an unstable career and, as a result, such people are seen as less creditworthy, according to experts. To qualify for a long-term loan, one must avoid too many job changes over a period of time.
Other factors
According to Kamra, lenders may also consider the amount of collateral and the margin when applying for a secured loan. In addition, the credibility of a co-applicant is a primary factor in the assessment in case someone wishes to benefit from a joint loan.
“To assess ability to pay, some lenders may even require employer profile and year of employment. Others may also request a postpaid / prepaid mobile service provider account, type of car owned and the type of house they lived in, â€Omkar adds. Shirhatti, co-founder and CEO of Karza Technologies.
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First publication: STI
