Why are employees more likely to qualify for instant loans?

There are typically two types of loans: secured and unsecured loans – the former are issued as mortgages against an asset held by the borrower and the latter have no such requirements. A personal loan falls under the category of unsecured loans, and anyone can apply for instant loans, which can come in handy when planning a trip, dealing with financial or medical emergencies, or paying off an outstanding debt. Although personal loans do not require collateral from the borrower, they can be more difficult to obtain and more expensive than secured loans.

While both employees and the self-employed or unemployed can apply for an instant loan, the application made receives a cap on approval. Before granting an unsecured loan, every bank or non-bank financial corporation (NBFC) wants to make sure that the borrower is able to repay the loan and with the income stability, the employed applicant gets a better chance of qualifying for an instant loan. In this respect, without a fixed income, the creditworthiness of a self-employed or unemployed applicant to repay the loan decreases.

But even for a salaried person, getting approval for a personal loan application depends on certain other factors.

Employer: The reputation of the organization with which they are affiliated is also considered when assessing an applicant’s eligibility before approving the loan.

Outstanding Debts: Outstanding debt defines a person’s financial obligations, and when someone has significant debt from previous borrowings, the lending financial institution may be skeptical about making timely repayments.

CIBIL score: Credit Information Bureau (India) Limited (CIBIL) is a credit rating agency with over 2400 members including financial institutions, NBFCs, banks and home finance companies. It manages the credit history of over 550 million customers and organizations. Although CIBIL has no say in whether a financial institution will approve a loan or credit card, it does play an important role in building the borrower’s primary and immediate impression.

Annual income: The annual income of an employee also influences the bank’s or NBFC’s assessment process regarding the prospects of repayment. It can also determine the amount of the loan to be sanctioned.

Restrict credit applications: Banks and other financial institutions always check an individual’s financial history before approving a loan application; If too many loans have been applied for in a short period of time, this creates a negative impression on the lender that the borrower’s existing financial health is not good.

Other eligibility criteria for a personal loan are Indian citizenship, minimum age 21 and maximum 60 years, one year employee, no default on payments, credit score above 750, etc.



The views expressed above are the author’s own.


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