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Essential Considerations of Banks in Personal Lån (Loan) Approval


Loans can be very helpful in doing certain things you’re not capable of due to less cash. So if you feel stuck financially and don’t know what to do, you can always turn to your bank and apply for an advance.


Nevertheless, banks have to consider certain factors before approving your loan. They will give you a Lån Guide to help you assess if you’re eligible for the loan. Some of the essential considerations of banks in personal loan approval include;

Surplus Income

Banks and other financial institutions will check how much you pay for EMIs and other loans. If after paying these bills you have a large sum of surplus income at your disposal, there is a great chance of you being given the loan. This is because the bank will understand that you have enough surplus income and you will be in a position to repay the advance without a great challenge.

Assuming your EMIs and the monthly installments for the loan are high, this translates to lower surplus income. Therefore, your chances of securing a debenture from the bank will somehow be difficult.

The financial institution will see that you already have enough bills and expenses on your plate and you wouldn’t be in a position to repay the loan. Defaulting to repay the credit which can happen because you don’t have enough surplus income is a risk any financial organization cannot entertain.

So, before applying for a personal loan to establish yourself, it is vital to check the amount of your surplus income. If it’s a little bit low, find a way to reduce them to be eligible for the credit. If your surplus income is high, then you are good to go. Apply for that loan and do the things you have always wanted to with the money whether it’s starting a business or buying a house.

Your Occupation

This is among the crucial things a financial institution must check before deciding whether you are eligible for the credit or not. There are some of the occupations banks consider and there are some which will make you not qualified for the advance. Some occupations such as PSU employees and government employees are the most preferred by the banks. Other stable occupations that can be considered include lawyers, engineers, chartered accountants, and doctors plus the individuals working with blue-chip companies.

Advance applicants from private organizations and self-employed individuals are always given the last priority. If the organization you work for has a reputation of not paying salaries to its employees, then it will be hard for your advance to be approved. Banks consider this factor because if you are not paid, where will you get the money to repay your credit in case it is approved?

Additionally, individuals who have the behavior of switching from one job to another have a possibility of their credit applications not being approved. This is because they will make it hard for the lender to keep track of them in case you default on the advance repayment.

Nevertheless, lenders treat all loan applications the same way regardless of whether you’re employed by a private or public sector. But, the kind of job you do is critical to them to assess your repayment capability. Read more here

Purpose of the Loan

Banks from which you are applying the credit must ask you to explain what you intend to do with the loan before approving it. This is because your advance’s purpose can affect your repayment capability. You can disclose the purpose of the loan to the financial institution and they fail to approve your credit.

There are some projects you can decide to do with your loan money such as starting a new business from scratch and you don’t have the required experience. This can lead to the financial organization not approving your advance and if they do, the interest rate will be a little bit higher since such a business has a high risk. Also, the bank can ask you for a mortgage just in case you become a defaulter.

If you disclose to the institution that the purpose of the personal advance is to grow your already flourishing business and many other useful things, there is a higher possibility of your credit being approved. There is a high chance of you being financially stable because of the profits you get from the business. So, the lender would not have any other reason not to approve your loan application.

So, it is wise to decide in advance what you intend to do with your advance. This will not only help convince the lender that you are capable of repaying the credit. It also will be essential for you to ensure you are putting that money into good use to avoid struggling to repay it while in a real sense it wasn’t of much help to you.

Amount of Loan

The amount of credit applied by the borrower is a vital factor banks consider. You cannot just be granted the amount you want before the bank checks for some crucial things.

If you apply for a small amount of credit, there would be a higher chance for it to be approved. It is not automatic that you will be given the advance because it’s of a low amount. The possibility of it being approved generally depends on your relationship with the bank.

If you request for a very large sum, there is a lower chance of it being approved. And if it’s approved, you have to put collateral to hedge the high risk. Generally, your repayment capability, your financial standing, and other factors are the determinants of whether your loan amount will be approved or not. Click here to learn more.


It is significant to note that for your credit to be approved, the bank has to look into certain factors. It is not automatic that because you are a regular customer of the bank if you apply for an advance it will be approved instantly. Financial organizations are businesses that aim at making profits similar to other institutions. They want to avoid losses and risks as much as they can. So, if your credit wasn’t approved, know they had a valid reason not to. Check into some factors and work on them and maybe next time you will be lucky.