Having a steady income is essential to qualify for any loan, and when a financial institution receives a personal loan application from salaried employees, the worry regarding bad debt minimises.
The application and approval process of a personal loan for salaried employees occurs quickly and almost instantly.
However, assured monthly income and employment status can even lead to loan rejection if risk managers find issues in other aspects (such as poor credit score) of the applicant’s income profile.
Personal Loan For Salaried Employees
The following sections provide tips to help salaried employees qualify for a personal loan.
1. Maintain a decent credit score
Credit score plays a crucial role in the personal loan approval process. It is a three-digit numerical expression (ranging from 300 to 900) calculated based on an individual’s credit file that ultimately mirrors his/her creditworthiness.
Financial institutions assess credit and repayment history, debt-to-income ratio, and credit utilisation to compute credit scores. The higher the number, the greater the chance of faster loan approval.
A credit score of 750 or above hence is considered ideal. In addition, adopting certain effective strategies will help you to improve your personal credit score.
For instance, borrowers have to pay all outstanding loan amounts in the form of credit cards and EMI in full in case of low CIBIL scores.
Timely payment of dues has a positive influence on credit scores. When individuals deal with multiple credit cards or loans, making a timely payment for each financial product and managing various loan payment methods can be a daunting task.
To avoid delays or missed payments, they can set alarms or reminders.
2. Declare all income sources
Individuals, including salaried employees with a steady monthly income, can obtain an instant loan for salaried employees easily and manage sudden expenses efficiently.
A personal loan for a medical emergency can serve the best purpose here.
However, if the monthly income is low and does not match the eligibility criteria laid down by financial institutions, one can face trouble during the loan approval stage.
The ideal proposition would be to declare all income sources and submit supporting documents while applying for a personal loan.
Individuals can earn from several sources, including rental income, income from part-time services, and income from investment in the form of interest.
All these income details can easily suffice the lender’s financial criteria; therefore, apart from the regular income from salary, borrowers must mention all their income sources in the loan application.
Financial institutions prefer applicants with higher income as it eliminates the chances of loan defaults, consequently increasing the chances of loan approval.
Adding a co-applicant with a good credit score and stable income will boost the loan application too.
3. Keep a low debt-to-income ratio
Debt-to-income (DTI) ratio is a personal finance metric that compares the amount of debt available to a borrower to his/her overall income.
Financial institutions measure an individual’s ability to manage monthly payments and repay the total loan amount through the debt-to-income ratio.
A debt-to-income ratio of up to 40% is considered ideal. A low DTI ratio reflects a borrower’s creditworthiness and increases his/her chance of getting faster loan approvals.
Salaried individuals with a high debt-to-income ratio can increase EMIs toward their existing loans.
They must postpone big-ticket purchases (if possible), which will buy them a certain time to work on improving the debt-to-income ratio.
4. Avoid frequent borrowing
When individuals borrow money from different sources simultaneously or apply for multiple loans or credit cards, keep in mind that prospective lenders will scrutinise this.
Too many hard enquiries within a short span of time send out a negative impression of borrowers to lenders; they may have questions about the borrower’s repayment capacity.
Data regarding hard enquiry stays on a credit report for over 2 years, although credit bureaus consider data from the previous 12 months while calculating an individual’s credit score.
Hence, it would be beneficial for salaried individuals to limit credit card applications or other financial products if they plan to avail a personal loan shortly.
Reputed financial institutions offer high-value personal loans at competitive interest rates and ensure faster loan disbursal.
Moreover, some financial institutions like Bajaj Finserv also extend pre-approved offers to their existing customers.
These offers are also applicable to several financial products, including personal loans, credit cards, business loans, etc.
Individuals can check their pre-approved offers by entering names and contact details.
Personal loans are emerging as the preferred means of financing. Individuals can manage emergency expenses as well as plan for funding a child’s education, marriage and renovation of home.
Before You Go
With the help of the tips mentioned above and proper implementation of the same, salaried employees can easily qualify for a personal loan.
Remember, borrowers must check eligibility criteria and document requirements before applying for a personal loan for salaried employees.
