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Why are employees more likely to qualify for instant loans?

There are basically two types of loans – secured and unsecured. Secured loans have some assets as mortgages – like home loans, car loans, etc. While unsecured loans have no such requirements – like personal loans, credit card loans, etc.

Because some assets are held as a mortgage, secured loans are easier to get and also cheaper than unsecured loans.

On the other hand, unsecured loans without underlying assets are harder to get and also expensive.

In addition, with no assets held as collateral, banks and non-bank financial corporations (NBFCs) ensure that borrowers are able to repay the loan.

Because employees have a steady income, they can pay the Equalized Monthly Payment (EMI) without much difficulty and have a better chance of taking out unsecured loans.

“Any bank or NBFC that lends money obviously has to pay back the amount. Therefore, the most important criterion is to ensure that the borrower has the means and intention to repay the loan that has been drawn down. Employees then invariably have an advantage over non-employees in terms of easy access to credit,” said Anil Pinapala, CEO and Founder of Vivifi India Finance.

Even among employees, a person with longer tenure and job stability has a greater chance of getting a loan sanctioned.

“There are factors that personal loan providers consider. To get the loan, you need to make sure you qualify for it,” Pinapala said.

Pinapala lists some of the factors affecting eligibility to receive a loan –

current income

Your current income plays the most important role in determining your eligibility for a personal loan, as your repayments depend on it.

payment burden

Your payment burden is another important factor. Vendors need to know if you’re already overstretched or still have wiggle room. Again, this depends on your debt-to-income ratio.

credit score

In addition, your credit rating will determine how easily you qualify for a personal loan, as it reflects your personal financial management skills and responsibility towards repayments. So if you have a healthy credit history, you can rest assured that you are on good books for a personal loan.

stability of the employer

While the vendors are checking your data, they are also examining your company’s profile and reputation.

“To reiterate, your regular income, employer, city of residence, payment history, and credit history evaluate your eligibility for a personal loan,” Pinapala said.

Richard Dement

The author Richard Dement