What Will a Bank Look at When Approving Your Personal Loan Application?

Latest News Your Personal Loan Application

Your Personal Loan Application: People are likely to take a personal loan when they need funding for a significant purchase or any other expense that warrants a sizeable cash infusion. Reputed lenders, including Alex Bank – personal loans have a straightforward application process. 

Since these loans are usually unsecured and don’t demand any collateral, the bank will closely and thoroughly vet your application before approving it. Some vital aspects that banks tend to consider when evaluating your application are your credit history, level of income, employment history, age, and even nationality. 

Personal Loan Process

When you approach any bank with a personal loan request, the process involved can be broadly broken up into:

  • Completing your loan application form
  • Submitting mandatory documents that serve as proofs of your income, address, and identity covering your age and nationality 
  • Verification of the submitted documents by the bank authorities
  • The final authority communicating their decision to sanction or reject your loan application request

Essential Aspects that Banks Investigate

Digital banks are introducing customer-friendly solutions for prospective borrowers. For instance, digital banks like Alex Bank – personal loans are a stress-free way to access funds you urgently need at competitive interest rates.

Listed below are the essential aspects that a bank will verify when you seek a personal loan and fulfil the eligibility criteria:

Credit History

Your credit score and history enlightens the lender on how you manage borrowed funds. A credit history that portrays you as a defaulter on outstanding debts increases the potential lender’s risk of not recovering their loan amount. 

Your pattern of settling past loans promptly indicates a positive repayment behaviour in the future too. In simple terms, a solid credit history with a high credit score indicates to potential lenders that you are a reliable borrower.

Sources of Income

A secure and consistent source of income is a green signal for the bank to approve your personal loan application. Proof of a substantially high and steady income makes you eligible to borrow a correspondingly higher sum. 

If you are a salaried individual, your recent payslips indicate your monthly income. Should you be self-employed, your latest bank statements reveal your monthly earnings. 

Additional sources of income besides your steady earnings and the fact that you pay income tax are considered plus points. 

It is also important to ensure you have a consistent work history, as this indicates job security and stability to potential lenders. Banks usually ask for six months of pay stubs, so as to ascertain that you’ve been at your current job for a while and are not likely to shift anytime soon. 

The bank will not consider you a potential repayment defaulter when your financial statements reveal a considerable surplus after paying your monthly outgoings. 

Present Age

First and foremost, you need to be an earning adult to apply for a personal loan. Your age is an indicator of your financial stability. When in the prime of your employment years, your earning capacity is likely to increase gradually as you prosper in your chosen career path. 

Applying for a loan as you near your retirement years diminishes your chances of getting it approved. 

Debt-to-Income Ratio

This ratio reveals your monthly debt obligations against your monthly earnings in percentage form. A low debt-to-income ratio encourages the bank to sanction your loan. So, it is preferable you clear all existing debts before applying for a personal loan. 

Your reasonably high monthly income will not necessarily bail you out when your total outstanding debt is nearing half your earning capacity. Lending financial institutions would rather not risk loaning to you should your debt payments exceed 43% of your income.


The bank only considers your loan application provided you are a permanent resident or citizen of the country where you are applying for financial assistance. Your valid identity proof should reveal your nationality, and where there is a disconnect, your citizenship becomes grounds for rejection.

Loan Amount Requested

As a borrower, if you apply for a higher loan amount, the bank is likely to scrutinise your application in greater detail. Although a smaller loan application also involves screening your income sources, repayment capability, and financial history, the verification process is comparatively less extensive.

When the purpose of taking the personal loan is low-risk, like for developing your property or constructing your home, getting approval is less complicated. High-risk loans are more likely to attract higher interest rates or face rejection. 

The bank considers you high-risk should you, for example, seek a loan to start a new venture with no prior entrepreneurship experience.

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