Even if banks differ vastly in their operations, they are pretty similar when it comes to what they look for while reviewing a loan application. Whether you are applying for a personal loan, home loan, or a business loan, apart from a few minor differences, the approval process is pretty much similar. 

The main goal of this daunting review process is calculating the risk to the bank by approving a particular loan application.  The bank needs to ascertain whether the borrower is likely to repay the loan along with the accrued interest. Needless to say delays in repayment and non-repayments cause banks to lose money. Hence it is in the interest of banks to try to keep these bad loans at a minimum. This is why scrutinising loan applications is very important.

There are essentially three important things banks look into while reviewing a loan application. Let us have a look at each one of them in detail:

Credit score

Credit Score or the CIBIL Score is that magical number which allows banks to instantly figure out how you have managed your finances in the past. The score ranges between 300 and 900 and the higher your CIBIL score the better are the chances of getting a loan approved. Banks generally prefer giving loans to people with a CIBIL Score of above 750. Loans are provided to people with lower CIBIL Scores too, but the banks generally charge a higher interest rate for such loans as the borrower carries a higher risk. Moreover, if the CIBIL score is poor, banks can decline the loan application.

Employment history

If you are a salaried individual your employment history will also play an important role in the loan approval process. Banks need to make sure you have a steady source of income with which you can repay the loan. Generally, they look at your work experience and the amount of time you have worked with an employer (especially the current employer). If you have been working with your current employer for a long time, it is considered as a positive sign by the banks.

Changing jobs multiple times or switching to another job before applying for the loan or during the loan application process is considered a negative sign. However, even if you have switched multiple times but are working in the same field this shouldn't create any major problem in the loan approval process by itself. But combine this with a poor credit  score and there is a strong possibility that the bank will decline the application.


Loans are of two different types – secured and unsecured. Secured loans require you to put up a collateral like your house, vehicle, etc. as security. In case the borrower is not able to repay the loan, the bank will have the right to take the property and then sell it in order to recover its money. Unsecured loans on the other hand are given without a collateral. The interest rates of unsecured loans are generally higher and the loan amounts are smaller, since the banks expose themselves to a higher risk with these types of loans.  

When it is a secured loan, the banks will  ascertain the value of the collateral and will generally prefer it to be equal to that of the loan amount. However, they do approve loans where the collateral is not at par with the loan amount, if the loan application is otherwise strong. People who have poor credit score can put up a collateral of a value higher than the loan amount to improve their chances of getting the loan approved.

While banks do look into several other factors the ones mentioned above are three of the most important. So before applying for a loan, make sure that you keep the above factors in mind as they can substantially increase your chances of getting the loan.

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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.