Learn how to check your bank loan eligibility

30th November 2015

 
 

If you are deciding upon availing a financing facility from a bank, it is important to understand and gauge your loan eligibility. How does a bank screen your application? What makes your profile worthy of a bank loan? To determine your loan eligibility, the following two points are to be noted:

  • Gross and net income excluding variable monthly allowances. Loan eligibility is only calculated on fixed monthly income. In most Pakistani banks, the minimum threshold for income is Rs. 25,000 per month. In some instances, income can be clubbed with spouse income to increase loan eligibility. The applicable loan amounts are calculated as multiples of gross income. In the case of personal loan eligibility, multiples can increase up to 15 gross salaries, whereas in the case of home loan eligibility, multiples can be up to 30 – 40 gross salaries. Net income is important to calculate the debt burden of installments on your take-home salary. The installment amount of loans offered by banks can be extended up to 50% of net income. In the case of self-employed individuals or businessmen, a two year stable bank statement is the requirement of all banks. The calculation for net income is computed through the monthly average balance turnover in the business account.
  • Your loan eligibility will depend on your credit worthiness, checked through your ECIB report. The ECIB report checks the number of lending products being availed, regularity in loan repayments and settlement amounts if any. To qualify for a loan, a clean ECIB means minimal late payments and no record of bad debts or settlements. The number of products being availed affects the cushion available in your net income for installment purposes. For personal, auto and home loans, the monthly installment amount is deducted from your net income, whereas in the case of credit cards and cash line facilities, 5% of the total limit is deducted as monthly installment amounts. The greater the cushion available in your net income, the eligibility for higher loan amounts increases. Interestingly enough, some banks offer greater loan eligibility to individuals who have availed or are currently availing lending products from other banks. This is primarily because the bank can analyze repayment trends on existing loans to check credit worthiness.

Although most banks conduct extensive checks before determining the loan eligibility of an applicant, the aforementioned points are important to evaluate your own loan eligibility. If you feel your profile fits with the requirements of banks, you can avail a lending facility through a bank. Next time you visit your bank to inquire about loans, ensure that you have gauged your loan eligibility yourself!

 

By Saad Niaz

 

 
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