A personal loan is one of the most common and straightforward types of unsecured credit available for any type of personal necessity. Personal loans can be used to help with any type of financial emergency, such as a medical emergency, a large purchase, or little bills.
According to experts, the popularity of these loans stems from their accessibility. It is a good option for a borrower who wants to receive money quickly. Having said that, there are a variety of reasons why loans are turned down. If one keeps getting turned down for a loan, there must be something wrong with him or her.
As a borrower, all you have to do is play your cards well and grasp the main reasons behind your inability to obtain loans from lenders.
“Since personal loans are largely unsecured loans, lenders frequently look for a regular and reliable source of income to assure prompt repayment of the loan,” explains Gaurav Jalan, CEO and Founder of pocket. A borrower’s repayment capacity is used to determine eligibility for such unsecured loans because lenders are more concerned about the risk involved.
Borrowers’ income, employment status, work history, and the profile of their company are frequently used to determine loan eligibility. Even if you have a decent CIBIL score, many lenders will take your salary, employment status, and work experience into account.
They use this information to analyze whether or not a borrower has the financial means to repay the loan on time. Even if you have an excellent credit score, your job will play a big role in deciding your personal loan eligibility.
“Job security, as well as the borrower’s income, is of highest concern to all lenders,” Jalan says. This is why lenders frequently categorize employers based on a variety of criteria.” “They decide the job stability of employees based on this,” he continues, “such as the number of years they have been in business, the number of employees, and so on.”
For example, if a borrower has recently joined a company, getting approval for a personal loan may be challenging. Similarly, if a borrower works for a startup, he or she stands a good danger of losing his or her job if the startup fails. SMEs also have a high churn rate, which means that borrowers are more likely to lose their jobs at any time. According to industry experts, most lenders favor candidates with a solid job and years of expertise when approving a personal loan.
Lenders are more likely to approve applicants’ personal loan applications if they have a job guarantee from a high-net-worth organization and past employment experience.
The majority of the population, on the other hand, does not work in such organizations and instead works in small businesses, SMEs, or even start-ups. Although such borrowers may not be approved by traditional lenders such as banks, they can always turn to NBFCs for help,” adds Jalan.