How Loan Applications are Evaluated

Wondering why loan applications take so much time under evaluation? Once you apply for a loan, the lender checks multiple parameters to understand your creditworthiness. This helps them decide if they want to lend you money. Here are a few ways loan applications are evaluated.

Checking the 3 Cs in Loan Applications:

Banks and Non-Banking Financial Corporations (NBFCs) usually look into the following parameters before lending money.


Nobody is in the market for charity. Lenders look for reliable borrowers who can pay the amount back in time, while not missing out on the interest rates. Here are some questions you must consider when applying for a loan:

  • If you borrow money, how likely are you to be able to pay the amount back?
  • Do you hold a steady source of income?
  • Will you be able to take care of the loan and your expenses together?
  • Do you have other loans you’re already repaying?


Usually, lenders like to secure their loans by keeping your assets or some sort of capital as collateral. If you fail to pay up the loan, the collateral is taken away by the lender. Sometimes, lenders view capital as a way to check your creditworthiness.


Your creditworthiness is your ability to pay off your debts. It is a valuation lender perform to determine the possibility of a loan default. This valuation considers factors like your loan repayment history and your credit score.

Today many NBFCs are moving away from traditional parameters to evaluate a loan application. Technology has enabled lenders to evaluate borrowers and their needs in a very effective way.

The most common input to evaluate if you are eligible for a loan is via a Credit Score and credit report.

A Credit report has all the information about your credit accounts – credit card, loans, overdrafts etc. It also provides insights into your credit behavior by using your repayment history, inquiry history and, credit capacity usage.

Credit bureaus like Equifax, Experian, and CIBIL analyze the credit history of a borrower and provide a credit score. In India the commonly used credit score is CIBIL. On a scale of 300 to 900, a score below 600 is alarming for lenders.

Your Social Media for Loan Application Evaluation

While the bureau score is an important input for evaluation, there are other parameters which provide comfort to lenders. Lenders analyze your capacity to repay by analyzing your incomes and costs.

Some interesting parameters used by some of the NBFCs include analysis of social media profile and digital footprint of businesses.

Small and medium businesses can borrow against their receivables. What’s more? your relationship with the lender can be an important aspect of the evaluation process.

At Instamojo, we are about to launch our lending product and would love to hear from you. For any suggestions and feedback, please write to us at


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