To receive a bank loan, you must pass the verification. This is a creditworthiness analysis and aims to assess whether a bank can borrow money without risk. High creditworthiness means that the chance to pay back the borrowed capital and interest within the prescribed period is very high. In such a situation, the bank grants a loan. Contrary to popular belief, creditworthiness should be demonstrated not only for high-value loans or mortgages, but also for cash loans.
Cash loan and creditworthiness
One of the first steps in applying for a cash loan is to determine your creditworthiness. The assessment is always carried out by the bank on the basis of its internal regulations and procedures. During the creditworthiness test, various factors are taken into account, e.g.
- length and type of employment,
- credit history
- personality profile of the applicant.
People applying for a cash loan at a bank should remember that creditworthiness assessment is the basis. It is examined regardless of how much the loan amount is applying for.
Why is the bank testing creditworthiness?
When granting a cash loan, the bank wants to be sure that it will get back the money it borrowed. To protect himself, he examines the applicant’s creditworthiness and assesses whether his income will allow him to pay his debts. The analysis is also helpful in determining the maximum amount that the bank can safely borrow.
See also what to do – How to solve the problem of loan repayment.
How much do you have to earn in order to have a credit rating?
You can apply for a cash loan regardless of your earnings. This is due to the fact that each bank independently sets the conditions on which it grants the loan, and the ability to repay the liability is assessed individually. Income is only one of the factors affecting your creditworthiness. A person who earns little but with a good credit history is more likely to get a loan than the one with high income, but who is in arrears with other obligations.
Lack of creditworthiness with a cash loan
Too low income, unpaid loans, credit card limits, paid maintenance or lack of stable employment are factors that can cause a bank to assess its creditworthiness as insufficient. In such cases, he will recommend reducing the amount of the cash loan, and in extreme cases will issue a negative decision and refuse the loan. Persons who have received a negative decision may apply for a cash loan from non-bank institutions. Obtaining it is easier, and parabanks usually do not require the presentation of income certificates.