It may seem very simple to apply for a loan, but there are many hidden factors that can affect its approval chances. For banks and other financial organizations, many factors would come into play before the loan is granted, most of which would not be disclosed to the borrower. If a borrower knows these secrets, he can get better loan terms and interest rates.
1. FOIR (Fixed Obligation to Income Ratio) Matters
FOIR determines how much of your income is already committed to existing EMIs and obligations. Ideally, lenders prefer a FOIR below 50% for salaried employees and below 60% for self-employed individuals.
Tip: Reduce your existing debts before applying to improve eligibility.
2. Credit Score isn’t the Only Factor
A good credit score (750+) improves your chances of approval, but banks also check income stability, employment history, and payment habits.
Tip: A high credit score alone won’t guarantee approval—ensure your financial profile is strong.
3. Loan Rejection Can Hurt Future Applications
Multiple loan rejections lower your credit score and make future approvals harder. Every application creates a “hard inquiry” on your credit report, signaling financial distress to lenders.
Tip: Apply only with lenders where you meet the eligibility criteria.
4. Processing Fees Are Non-Refundable
Banks charge a processing fee (0.5% to 2.5%) even if your loan is rejected.
Tip: Compare processing fees before applying and check if any lender offers discounts.
5. Hidden Prepayment & Foreclosure Charges
Paying off a loan early can save interest, but banks often charge 2-5% as prepayment penalties.
Tip: Check prepayment terms before finalizing a loan to avoid extra charges.
6. The Reputation of Your Employer Matters Too Much
Your chances of getting a loan approved and obtaining cheaper interest rates are increased when you work for a reputable company, multinational corporation, or government agency.
Advice: To support your application, include more financial evidence if you work for a startup or small company.
7. Self-Employed Applicants Face Tougher Approval
Freelancers and business owners often struggle with loan approvals due to irregular income.
Tip: Maintain detailed income records and a high credit score to improve eligibility.
8. Longer Loan Tenure Increases Interest Costs
Opting for a longer tenure reduces EMI but significantly increases the total interest paid.
Tip: Choose the shortest tenure you can afford to save on interest.
9. Personal Loan Interest Rates Are Negotiable
Many borrowers accept the first rate offered, but banks allow negotiations based on your profile.
Tip: Negotiate a lower rate with good credit and stable income.
10. Applying for several loans will lower your credit score.
While it might seem wise to apply to multiple lenders at once, doing so lowers your score because each application generates a hard inquiry.
Tip: To evaluate several possibilities without affecting your credit, use a fintech platform such as Upniva.
11. Choose Carefully Between Fixed and Floating Interest Rates
Although they stay the same, fixed rates are typically higher than variable rates, which change according to the state of the market.
Advice: Select floating rates for possible savings and fixed rates for stability.
12. Your Residential Address Can Impact Approval
Lenders assess the risk associated with your residential area. Applicants from high-risk locations may face rejections or higher rates.
Tip: If possible, provide an address from a low-risk locality.
13. Overborrowing Can Lead to Rejection
Banks evaluate your repayment capacity. Requesting an amount much higher than your eligibility reduces approval chances.
Tip: Borrow only what you need and what you can comfortably repay.
14. Instant Pre-Approved Loans Have Strings Attached
Pre-approved offers might seem attractive but often come with higher processing fees or insurance add-ons.
Tip: Always read the fine print before accepting pre-approved loans.
15. Loan Approval Time Varies by Lender
Banks may take several days for approval, while NBFCs and fintech platforms like Upniva provide quicker approvals.
Tip: Choose lenders based on urgency and processing time.
How Upniva Simplifies Loan Approval
- Smart Eligibility Checks
Upniva matches you with lenders where you have the highest approval chances, reducing rejections.
- Minimal Documentation
Unlike traditional banks, Upniva streamlines the documentation process, minimizing delays.
- Real-Time Loan Tracking
Monitor your loan status easily and avoid long waiting periods.
- A Wide Lender Network
If one lender rejects your loan, another may approve it, increasing your chances of securing funds.
Final Words
Understanding these loan approval secrets can save you money, improve your eligibility, and help you secure better loan terms. Use Upniva expertise to compare offers, avoid unnecessary fees, and get your loan approved quickly.
Would you like assistance in choosing the best personal loan? Let Upniva help you find the right lender today!