How Do Banks Decide Who Gets a Loan?

Imagine a bank like a toy store, and a loan is like getting a toy you can pay back later. The bank checks if you're likely to pay it back, maybe by looking at how much money you earn or if you already have toys (like other loans). If the bank thinks you'll be able to return the toy later, it lets you take it home.

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Examples

A kid with a job earning $10 per hour is more likely to get a loan for a bike than one who earns only $5 per hour.
A person who pays their phone bill every month is seen as responsible and might be given a bigger loan.
If someone has five loans already, the bank might say no because they’re too busy paying others.

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Categories: Economics · Loans,Banks,Credit