How Does Your Employment Status Affect Your Personal Credit Score?
Since personal loans are primarily unsecured loans, lenders often look for a regular and stable source of income to ensure timely loan repayment.
A personal loan is one of the most popular and easiest types of unsecured loans that one can opt for for any type of personal need. Personal loans can be considered for any type of financial crisis, e.g. B. a medical emergency, a large purchase or to cover small expenses.
Experts say that the popularity of these loans is due to their easy availability. It is a reasonable choice for a borrower to get money without much effort. However, there are several instances where loans are denied. If someone keeps refusing a loan, they must be doing something wrong. As a borrower, you just need to play your cards right and also understand the main causes of not getting loans from lenders.
Gaurav Jalan, CEO and Founder of mPokket, says: “Because personal loans are primarily unsecured loans, lenders often look for a regular and stable source of income to ensure timely loan repayment.” He further adds: “Since the risk for Lenders are higher on such unsecured loans, they base creditworthiness on the borrower’s ability to repay.”
Loan eligibility often depends on the borrower’s income, employment status, work history, and employer profile. Even if you as a borrower have a good CIBIL score, many lenders often consider your salary, employment status, and work experience. On this basis, they determine whether a borrower has the financial capacity to repay the loan on time. Note that despite having a good credit history, your employer remains a key component in determining your eligibility for a personal loan.
Jalan says: “Job security is of paramount importance to all lenders, along with the borrower’s income. For this reason, lenders often separate employers based on various demarcation criteria.” B. the number of years they have been in business, the number of employees, etc.”.
For example, if a borrower has just joined a business, it may be difficult for them to obtain personal loan approval. When a borrower works with a start-up, there is a relatively high probability that they will lose their job because the start-up fails. SMEs also have a high churn rate because if this is the case, such borrowers also have an increased risk of losing their jobs at any time. As a result, industry experts say most lenders prefer applicants who have a steady job with years of experience when approving a personal loan.
“A job guarantee with a wealthy company, backed by the borrowers’ good work experience, will result in quick approval of their personal loan applications by the lenders. However, the majority of the population does not work in such organizations and would either work in small businesses, SMEs or even start-ups. For such borrowers, although they may not get approval from traditional lenders like banks, they can always consider borrowing from NBFCs,” says Jalan.
All NBFCs have different personal loan eligibility criteria which can be easily accessed through their websites.