Since personal loans are primarily unsecured loans, lenders often look for a regular and stable source of income to ensure timely repayment of the loan.
A personal loan is one of the most popular and easiest types of unsecured credit that one can opt for, for any kind of personal needs. Personal loans can be looked at for any kind of financial crisis, such as a medical emergency, a big-ticket purchase, or meeting any small expenses.
Experts say the popularity of these loans is due to their easy availability. For a borrower, it is an appropriate choice to get funds without much hassle. Having said that, there are multiple instances where loans get rejected. If one keeps getting rejected for a loan, there must be something that he/she is doing wrong. As a borrower, you just have to play your cards right, and also understand the primary causes behind your failure to receive loans from lenders.
Gaurav Jalan, CEO and Founder, mPokket says, “Since personal loans are primarily unsecured loans, lenders often look for a regular and stable source of income to ensure timely repayment of the loan.” He further adds, “As the risk for lenders in such unsecured loans is higher, they base the loan eligibility on the borrower’s repayment capacity.”
Loan eligibility is often contingent on the borrowers’ income, employment status, work history and their employer’s profile. Even if as a borrower, you have a good CIBIL score, many lenders will often consider your salary, employment status and work experience. Based on this, they determine whether a borrower has the financial capacity to repay the loan on time. Note that, despite a good credit score, your employer remains a key component in determining your eligibility for a personal loan.
Jalan says, “The job security, along with the income of the borrower, is of utmost importance to all lenders. This is why lenders often segregate employers based on various demarcating factors.” He further adds, “Going by this, they decide the job stability of employees, such as the number of years they have been in business, number of employees, etc.”
For instance, if a borrower has just joined a company, they may find it difficult to get approval for a personal loan. Similarly, if a borrower is working with a start-up, he/she has a relatively high chance of losing the job due to the start-up failing. SMEs also have a high churn rate, because if which such borrowers also have an increased risk of losing their job at any time. Industry experts say this is why most lenders prefer applicants who have a stable job with years of experience when sanctioning a personal loan.
“A job guarantee at a high-net-worth company, backed with good work experience of borrowers will lead to quick approval of their personal loan applications from lenders. However, the majority of the population does not work in such organizations and would either be working in small enterprises, SMEs or even start-ups. For such borrowers, though they might not secure approval from traditional lenders such as banks, they can always consider borrowing from NBFCs,” says Jalan.
All NBFCs have different eligibility criteria for personal loans, which can easily be accessed through their websites.