Why are salaried employees more likely to qualify for instant personal loans?

There are basically two types of loans – secured and unsecured. Secured loans have some assets as mortgages – like home for home loan, car for car loan etc. While unsecured loans don’t have any such requirements – like personal loan, loan against credit card, etc.

As some assets are kept as mortgage, secured loans are easier to get and are also cheaper than unsecured loans.

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

Moreover, without any assets kept as security, banks and non banking financial companies (NBFCs) ensure that borrowers have the capacity to repay the loan.

As salaried persons have regular income, they may pay the equated monthly installment (EMI) without much difficulty and have a better chance to avail unsecured loans.

“Any bank or NBFC that lends money, obviously needs the amount to be repaid. The most important criteria therefore, is to ensure that the borrower has means and intent to repay the loan availed. Salaried employees invariably then have an advantage over non-salaried individuals in terms of easy access to loans,” said Anil Pinapala, CEO & Founder of Vivifi India Finance.

Even among salaried, a person having longer service and job stability has more chance to get a loan sanctioned.

“There are factors that personal loan providers consider. To get the loan, you have to ensure that you qualify for the same,” said Pinapala.

Pinapala lists some of the factors that influence the eligibility to get a loan –

Current Income

Your current income plays the most vital role in assessing your eligibility for a personal loan because your repayments depend on it.

Payment Burden

Your payment burden is another important factor. Providers need to know if you are already overburdened or if you still have room to play. This again depends on your debt-to-income ratio.

Credit Score

Furthermore, your credit score determines how easily you qualify for a personal loan as it is reflective of your personal finance management skills as well as your responsibility towards repayments. So if you have maintained a healthy credit history, rest assured you are in good books for a personal loan.

Stability of Employer

Also, while providers check your details, they look into your company’s profile and reputation too.

“To reiterate, your steady income, your employer, place of residence, payment burden and credit history assess your eligibility for a personal loan,” said Pinapala.