How are your loan applications evaluated?

When it's time to buy your first car, build your home, or start your business, many Filipinos may find it necessary to secure a loan from a bank or lending company. With various options available, you'll find several choices that suit your needs and offer feasible repayment terms.

In the United States and the European Union, loan applications involve understanding the borrower's credit score. However, in the Philippines, there is no unified credit rating system. So, if you've applied for a loan but were rejected, you might wonder why. Here are some factors that banks and lending institutions consider when assessing your loan applications:

Current Income

Lenders will not loan money to individuals without a steady source of income. They want to ensure that you have sufficient income from one or more sources (e.g., salary, business, freelancing) to repay the loan while supporting your lifestyle and basic necessities. For example, if you have a net income of PHP 71,765 per month and apply for a home loan of PHP 2.5 million payable over two years with an indicative interest rate of 5.50%, you would need to pay PHP 110,239 per month, which is not feasible. However, if the same loan is spread over 10 years with an indicative interest rate of 6.75%, your monthly payment would be PHP 28,706, which is more manageable.

Current Household Expenses

Even if a loan's monthly payment is feasible based on your income, your overall household expenses may affect your ability to pay. Lenders may use investigators or interviews to assess your household expenses. Ideally, other family members contribute to the household income.

Current Standing with Credit Cards

Lenders may ask for details about your credit card accounts to assess your existing debt. This helps them determine whether you can afford new debt in addition to your current obligations.

Loan History

Your loan history, including past and current loans, is another critical factor. A good track record of timely repayments can positively influence lenders, while a history of delayed payments can reduce your chances of approval.

List of Assets

Certain loans require collateral. Lenders will need a list of your assets to secure the loan in case of default. This collateral can vary depending on the loan type, such as using a car for a car loan or other assets for different loans.

Loans can help many Filipinos achieve their goals by providing a financial boost. If your application was rejected, these factors might be the reason. For expert advice, let Junrix E-Services guide you in securing a bank loan—whether you're buying a home, a car, or need business capital. Talk to us to learn more about our loan products, customized to address your specific needs