Why Salaried Individuals Are More Eligible for Instant Personal Loans?

The reason behind the growing popularity of instant personal loans is that both employed and unemployed individuals can obtain them without having to pledge any form of collateral. However, most banks and NBFCs prefer salaried individuals over self-employed individuals.

There are two types of instant personal loans, i.e. secured and unsecured. Secured loans require the borrower to pledge their assets, such as gold, to obtain funds. The latter is quite the opposite, making it one of the main reasons for its popularity among salaried individuals. This is because even though they are unsecured, their interest rates are often low for employed individuals.

Their consistent source of income acts as an advantage, which gives lenders assurance that the borrower can make monthly repayments without fail. As a borrower, your job is to choose the right lender, such as Muthoot Finance, where visiting their official website and using the personal loan EMI calculator will give you a clearer picture of the repayment costs so that you can manage your finances better.

Factors Making Salaried Individuals Eligible for Instant Personal Loans

Nature of employment

Your monthly salary is the main deciding factor while evaluating the eligibility for an instant personal loan. Apart from that is the nature of employment that helps lenders determine whether you are eligible for the loan. For instance, government employees and salaried individuals at top MNCs (Multi-National Companies) are more likely to qualify for an instant personal loan.

Income Levels

Salaried individuals with a higher annual income are less likely to default on personal loans. This gives lenders the confidence to approve the loan application of salaried individuals over self-employed individuals. Additionally, if you have some extra amount in your bank account apart from the monthly salary, it will eliminate the doubts that the lender may have with the acceptance of your loan application.

Job Stability

Salaried individuals sticking to their current job for a duration of 12 months or more are more likely to get approval on their loan application. This is because frequent job switching indicates that you are not stable.

Debt-to-Income Ratio

Your existing debt-to-income ratio says a lot about your personal well-being and how you manage your finances. Salaried individuals with a lower debt-to-income ratio have better chances to qualify for a personal loan.

Documents Required of Salaried Individuals to Obtain Personal Loans

Identification proof such as Aadhaar Card, PAN Card or a Voter’s Card.
Salary slips and bank statements for the last six months as proof of monthly income.
Job offer letter or any form of verification from HR as proof of employment.
Rental agreement or utility bills as proof of address.

Tips to Improve Eligibility for Instant Personal Loans

First, do not make frequent enquiries and do not apply for multiple loans through different lenders. Doing this indicates that you rely heavily on credit, which does not give a good impression to the lenders.
Clear your existing debts before applying for another one. Having multiple loans shows that you are likely to default on either of them. This brings it to the debt-to-income ratio. Try to build a profile with a lower debt-to-income ratio for quick approval on your loan application.
If you have an existing loan, take the opportunity to improve your credit score by making monthly payments on time. Keep in mind that a credit score of 750 and above is generally considered good.

Even though availing of personal loans for salaried individuals is easy, there is a catch that most people often miss, i.e. maintaining a steady income with a lower debt-to-income ratio and job stability. As a borrower, we must not rely on what we see in advertisements and carefully compare the offers, such as the interest rates, tenure and other hidden costs such as processing fees, insurance, etc.

An important point that you must keep in mind is that personal loan interest rates are generally higher when compared to other types of loans. This is because they are unsecured, and so you must carefully compare what the lender is offering. The interest rates also vary from lender to lender. At Muthoot Finance, you can get a personal loan with ease. To know more about the interest rates, you can visit the nearest branch or put in an online application via our official website.