Summary: Lenders tend to trust individuals with a stable source of income and reliable employers. You can get your personal loan instantly disbursed as long as you meet the necessary employment criteria!
A loan is an excellent way to get out of a financial fix. Many people use loans to buy houses, pay for expensive vacations, have a wedding, etc. Thus, lenders and financial institutions also offer two types of loans – secured and unsecured loans. Security, in this context, refers to collateral, i.e. putting some assets up against a loan to get a higher amount or longer tenure.
Therefore, when you get an unsecured loan, it means that you do not need to put up any collateral. A personal loan is one such unsecured loan that many people avail of to cover various expenses. This loan type offers a lot of flexibility to the borrower since they can do whatever they want with the loan amount. However, it also represents a considerable risk for the lender, who has no collateral to fall back on should the borrower default.
Therefore, lenders take stringent eligibility measures before disbursing this loan. While these criteria include CIBIL score, age, income, etc., employment is also important. Income is, after all, only a part of employment – your lender needs to know that they can trust you to have a stable income and repay the loan on time.
How Employment Status Affects Your Personal Loan Eligibility
Job security plays a prominent role in determining your repayment capacity. This refers to how long you have been with the company, how many employees the company has, and your employer. Yes, many NBFCs determine your personal loan eligibility based on who your employer is since that largely determines your employment status.
How are employers categorised?
Most salaried workers work in the small and medium enterprises (SME) category. Thus employer profile plays a significant role in determining eligibility. Many lenders have defined lists of companies based on various factors such as:
- For how many years the company has been operational
- How many employees exist on the payroll
- Profit margins and turnovers
Companies that have a reputation of making a stable profit over a long period are automatically considered lower risk. Therefore, an employee at this company – especially if they are higher up in the hierarchy – gets loan approval faster than someone who has just joined a startup.
What if I have a good credit score?
While lenders definitely factor in your credit score, your employer still has a large hand in determining your loan eligibility and approval. Remember, this is an unsecured loan, meaning your lender is not asking for collateral. They can only trust your repayment capacity, and you need a stable income to prove this.
A top-tier employer can assure them that you will have a stable salary and continue paying your EMIs. This also reflects on the lender since they entirely bear the cost of defaulting on an unsecured loan. If your company files for bankruptcy due to a financial crisis, your loan becomes a “Non-Performing Asset,” tainting the lender’s reputation, too.
Thus, you need relatively high job security to get this loan. Low security can often lead to instant rejection of your loan request since the potential borrower poses too big a risk. Additionally, if the lender does accept a high-risk borrower’s loan application, they usually charge a much higher interest rate with a shorter tenure. This is irrespective of the borrower’s income.
Suppose a lower salary borrower with a stable job applies for a loan. In that case, they have a higher chance of approval at a lower interest rate due to the associated job security.
What about employees from unlisted enterprises?
Since most of the salaried population works in high-risk or “unlisted” enterprises, getting a loan can be very difficult. In such cases, lenders give them the option of applying for a loan with only income and credit history. The employer profile is essentially ignored, and as long as the income and credit history showcase some reliability, the employee gets their loan approved.
Therefore, while lenders may be willing to make exceptions in some instances, loan eligibility and approvals do largely depend on employment status. However, the good news is that if you meet the necessary criteria with job security, you can avail of instant online loan disbursals within 30 minutes of sending an application!