Personal loans do not require you to pledge any security to your lender. Hence, the loan providers do not have a backup if you fail to repay your loan. This increases the risk factor for lenders, and they base their approval for your loan application on your repayment capacity, as determined by your income, credit score, work history, and your employer’s profile. 

Read on to find out how your employer can affect your personal loan eligibility and how you can secure a loan while working for a small enterprise.

Additional Reads: Will My Personal Loan Eligibility Be Impacted During Lockdown?

How do lenders categorize employers?

Loan-providing financial institutions segregate companies into listed and unlisted categories. Additionally, lenders classify the organizations based on factors like the number of years they have been in business, the total number of employees, etc. Loan providers consider reputed, stable, and consistently profit-making companies that have been in operation for a long duration as top-tier employers. Employees of such organizations typically enjoy lenient personal loan terms like lower interest rates, higher sanctions, and longer loan tenures.

Why does your employer matter to the lender?

Why employer matter to the lender

Since your lender will not be able to auction your assets to recover losses if you default, your income and job security are vital to convincing them about your repayment ability. Your job security largely depends on where you work. 

A company with a low capital investment may fail to pay salaries regularly. In addition to this, such a company may shut down in the face of a financial crisis, leaving you jobless. If you are working for a small and financially unstable company, your job security will be considered low, and you will be deemed less creditworthy. 

You may not obtain adequate loan sanctions or may have to pay higher personal loan interest rates as compared to someone with a lower salary but working in a listed company.

Conversely, if you work for a high net-worth company, you have assured continuity of employment. Your income is therefore stable, and the probability of your default is minimal. As a result, you are more likely to secure an instant personal loan. Moreover, top-rated organizations often have financial tie-ups with loan providers. As an employee of such an organization, you can enjoy concessions on processing fees, preferential interest rates, relaxed norms on work experience, and other unique benefits.

How do you secure a sizeable loan amount if you are working for a non-listed company? 

You have the option to apply for personal loan from a non-banking financial organization (NBFC). Although a sound employer reputation still tips the scales in your favor, NBFCs typically focus more on your income and credit history. If you are earning a handsome salary and have maintained a good credit score, you can obtain a loan on attractive terms regardless of your employer’s status.

Conclusion

Working for a large corporation may prove to be beneficial while availing personal loans. However, several lenders offer loans to employees of smaller companies as well. 

You can consider Tata Capital for customized personal loans and zero charges on part prepayment. Apply for a personal loan online and access funds whenever you face a shortfall.

Additional Reads: Why Are More and More People Opting for Personal Loan After COVID 19?

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