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December 30, 2024
There has been a subtle change in spending patterns over the millennia. Post-COVID, facing uncertainty and challenges, there have been changes in the spending ratio to savings. Instead of saving, people prefer using their income to enjoy life fully. Simultaneously, there is an increase in credit usage, both secure and unsecured. Credit Cards and Personal Loans are widely used for lifestyle expenses and individual usage without considering repayment schedules. Thus, Banks are facing a higher average of payment defaults and are apprehensive about further funding.
Primary reasons why the percentage of rejection has increased include the following.
Overleveraged means that the applicant’s credit obligations are exhausting the income, and the Lender feels that the customer is financially stressed and unable to make timely repayments. When issuing further credit as an HDFC Bank Personal Loan, the HDFC Bank process will assess the applicant’s eligibility criteria and forward the customer details so they can check the CIBIL for the credit score and transactions. For example, Suresh has applied for an HDFC Bank Personal Loan of ₹ 5 Lakhs, and his profile details are as follows:
The bank team noted that Suresh’s pending credit card payments were more in ratio to the income earned.
The interest payable on credit card dues is 36% per annum, which was becoming a financial drain on Suresh. He applied for a Personal Loan from HDFC Bank to help manage his finances, but his request was declined, given that the Applicant is overleveraged. With the existing credit Bank debt, Suresh could not fulfil the HDFC Bank Personal Loan Eligibility Criteria as the Bank allows an applicant to allot 30% to 40% of the income earned towards credit repayment for loans and credit cards. The credit card dues must also not exceed 5 times the monthly income.
The above case is not unique; being declared overleveraged or not having the financial bandwidth to afford further credit is one of the common reasons for the decline of an HDFC Personal Loan or an HDFC Personal Loan TOP Up.
Find yourself in a situation where credit dues have become unmanageable, as in Suresh’s case. You can work out relief from the debt as follows With a Balance transfer of the Credit Debts to an HDFC Bank Personal Loan, the Bank will repay the credit card dues to the parent Bank. Suresh can conveniently repay the HDFC Bank Personal Loan with instalments at much lower interest. With the reduced financial obligation, he will no longer be judged as being overleveraged.
The CIBIL Score is not just a number but an evaluation of your credit management. Banks and NBFCs increasingly rely on credit history and ensuing CIBIL scores for issuing further credit. Banks like AXIS Bank and YES Bank will consider a Personal Loan request if the applicant has a CIBIL Score of 700 or higher. However, applicants with a CIBIL Score of 0 or -1 and those with no credit usage history are not eligible for a personal loan from either YES Bank or AXIS Bank. Applicants with no record of credit usage can Apply for an HDFC Bank Personal Loan if they meet the criteria for Personal Loan Eligibility HDFC Bank but will be issued conservative amounts at a higher interest rate.
With the change in spending patterns and increased reliability of credit tools such as Credit Cards and Personal Loans, people are likely to fall behind on payments. The delays and payment discrepancies affect the CIBIL Score and reflect in the history, so applicants seeking further credit will face rejection.
A CIBIL check before applying for credit will stand you in good stead to avoid a rejection. A self-check by an applicant will not affect the CIBIL ratings, whereas when a lender sends an enquiry to check the CIBIL, the score is reduced by 10 to 15 points. You can check if the score exceeds the required benchmark and if any updates do not match your usage. A good length of payment relationship with a Bank is likely to get you further credit quickly from the lender; for example, if you are presently running a Personal Loan from HDFC Bank and the EMI is being cleared on time, your request for surplus funds as an HDFC Bank Personal Loan Top Up is processed instantly.
On the other hand, if you have a settled account with any Bank in the past, it will catch up with you, and the Lender will not issue further credit. The lender notes your credit obligations in the CIBIL report and will calculate your eligibility for funds based on the eligibility criteria. Check your eligibility to pay a further EMI by using our EMI Calculator.
When you Apply for a Personal Loan, your CIBIL history will reflect your existing credit lines, types of credit, and total obligations.
As per recent developments and the Reserve Bank of India decree, applicants’ CIBIL records are to be updated every 15 days, which is twice a month. Customers must be informed each time their CIBIL is checked, and applicants must be updated on why a credit card application is declined. With the Reserve Bank of India encouraging transparency, applicants must know that their credit transactions are all recorded and available for Banks to check.
Most lenders offering Personal Loans and Credit Cards face the challenge of keeping unsecured lending defaults below the acceptable average, as recovery is an uphill task. Therefore, individual lenders have their norms for tendering the right segment. They use the CIBIL Score and the HDFC Bank Company Category List as a launch pad to provide a Personal Loan with speed and efficiency, such as an Online Personal Loan or with hard copies of documents. So, check your credit score and ensure you have the financial bandwidth to support further credit before Applying for a Personal Loan.
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