The sole objective of underwriting a loan request, by any lending institution, is to assess the risk associated with the repayment of the loan. Apart from the apparent factors like total income, debt to income ratio, banking and credit history, employers are also one of the crucial factors that impact the final outcome of the loan request. “Continuity of employment with an organization of repute is deemed to be a ticket to financial stability. Borrowers working with such employers can get benefited with a lower threshold of qualifying criteria, lower rate of interest and better loan terms apart from a faster decision,” says Arun Ramamurthy, Director of Credit Sudhaar.
We all know that companies also get rated based on their performance on various parameters. Similar to individuals, the entities that do not perform well on the assessment criteria can get blacklisted. What happens when a company gets blacklisted? Will the employees have access to credit or will they get declined despite having good credit scores and salaries?
“Blacklisting of a company will definitely have an adverse impact on the employees. Delayed salary credits, downsizing of salaries and redundant staff are potential threats while employed with blacklisted companies. All these things can result in increased risks of default. Therefore, banks and other lending institutions might be wary of extending credit facilities to the employees of such entities. And this could happen irrespective of the income and credit history that the individuals may have,” says Ramamurthy.
If one lands in such a situation, the logical thing to do is to change the employer. More because it would not only have an impact on one’s credit life, but more importantly, continued employment with a blacklisted employer can lead to financial disruptions sooner or later.
If the need for funding arises while being employed with a such company, one could take the following steps:
# The first lending institution to be contacted has to be the bank with your salary account. Owing to your length of relationship and performance on past trade lines, they might still be willing to extend a loan with some caveats like shorter term and higher rate of interest.
# Each lending institution has its own methodology of categorizing companies and the current employer may not be part of the list with all lenders. So, “there may be some lenders willing to give loans unless one is employed with prominent companies that go bankrupt (as we have seen over past few years). However, one has to be very careful and in the endeavor to procure credit one must not apply with various lenders at the same time since this can have adverse impact on the credit profile. A better option would be to connect with a credit advisor with established repute and seek assistance,” informs Ramamurthy.
# Peer to peer lending is another new age option that can be explored by such individuals. However, here they may not be able to get the full amount or may receive the amount in parts over a period. There are a few fintechs as well that are lending for a shorter term, however, that comes at a high cost.
# Another option that has always been available with Indians is to take a loan against gold, which is available with a large population in our country. “The same can be utilized for taking a loan if the need arises. The best part is that the borrower will be required only to service the interest and can repay the principal amount at one go when he wishes to withdraw the gold,” says Ramamurthy.
# Another available option is to take a loan against the surrender value of a life insurance policy from the insurance provider. Such loans can only be taken on specified policies that can be assigned.
While the few options mentioned above will always be available, change of employment should be the priority so that you are able to have access to regular funding at better rates.