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If you're considering a personal loan, it's important to know that simply applying to a bank isn't enough. Getting a loan also depends on your financial situation and how trustworthy the bank or financial company considers you. Many times, people apply for a loan and their application is rejected. The reason for this is unclear, but there are some important factors behind it. Let's explore five major factors that affect your ability to get a loan...

Poor Credit Score
Your credit score reflects your loan repayment history. If you've previously taken out a loan and haven't paid installments on time, or if you have a persistent credit card balance, your score may be low. Most banks prefer a score of 720 or above. If your score is below 600, getting a loan may be difficult.

Excessive Debt
Banks need to consider how many existing loans you have against your current income. If a large portion of your salary is going towards EMIs on existing loans, it becomes difficult to obtain a new loan. This is called the 'debt-to-income ratio'. The higher this ratio, the lower your loan eligibility.

Low Income
If your income is too low, banks fear that you won't be able to repay loan installments on time. In such a situation, even if you have a good score, your loan may be rejected due to your income. The bank evaluates your monthly EMI against your income.

Requesting a Large Loan Amount
If you have requested a loan that is excessive and your income doesn't justify the amount, the bank may flatly refuse. The larger the loan, the greater the responsibility; the bank will only grant a loan if your income can cover the burden.

Other Small But Important Points
There may be other reasons for loan rejection that people often overlook. For example, being too old or too young, not having your mobile number linked to your Aadhaar card, not having filed your Income Tax Return (ITR) for the past few years, and lacking job stability or being in a trial period, all of these factors can hinder loan approval.

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