Most lenders have various criteria that borrowers must meet before they can receive loans. This is because providing a loan to an individual constitutes a risk for the lender. The borrower may not pay back the loan, which would mean the lender would either have to pursue legal action or take the loss. In some cases, a borrower may be ineligible to receive a loan.
Eligibility
A borrower's eligibility depends on two main factors: the policies of the lender and the type of loan the borrower is trying to take out. Generally, larger loans have steeper eligibility requirements. For example, a person must provide a large amount of documentation showing he is creditworthy and financially secure to take out a mortgage and very little to take out a high-interest payday loan.
Credit Rating
Often, a person will be unable to take out a loan if his credit rating -- the credit reporting companies' measure of his creditworthiness -- is too low. He represents too big of a risk to the lender. If his rating is so low, the lender may believe he will not pay back the loan at all or he will pay it very late, thus making him a bad financial bet.
Insufficient Income
Some lenders also require borrowers to have a certain level of income to receive a loan. For example, most mortgage lenders require people to provide documentation showing they receive a steady income. If they do not have a steady income, the lender may decide the risk of default is too high, regardless of their credit rating.
Bankruptcy
Sometimes, a person will be legally forbidden from taking out a loan. For example, when a person is in bankruptcy proceedings, the judge overseeing the case may order him to desist from taking out any additional loans. Although lenders may be willing to lend to him, the borrower may face a number of financial penalties for doing so.
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