Do you know working with a reputed company may get you loans at better terms, be it a lower rate of interest, a longer time frame to repay the loan and even more!

Loan Eligibility

We all know the fact that our CIBIL score is one of the important factors that decide our credibility. However, apart from this, several other factors together decide your loan eligibility. This includes our age, income, repayment capability, and debt to income ratio. But, only a few know that an applicant’s employment status also plays a major role in deciding his/her loan eligibility. 

How do banks decide your employer’s Status?

Most of the banks have divided employers based on their status, popularity, net worth, and stability into listed companies Super A, Cat A, Cat B, Cat C, Cat D. The employees of super A, Cat A and Cat B companies are counted as more creditworthy by the lenders. Hence, employees of these companies are provided with certain benefits which include lower ROI, more loan amount and better terms as compared to the applicants who are working in Cat C and Cat D companies. Non-listed companies are the ones that are not recorded anywhere and employees of such companies face problems even to get approved for a loan. In brief, the employees of the Super A / Cat A companies are considered as ‘Hot Leads’ and approve their loan application more easily as compared to that of others.

Why do banks focus on employer status?

  • The stability of the employing company is the prime factor the bank looks at when considering the loan application of an individual. 
  • Reputed companies do not pose the risk of closing down soon, whereas smaller and unlisted one’s companies are at risk that they can close, layoffs are also common in such companies.
  • Employees of well-established companies have a job and income security which employees of small companies do not have.
  • The most important reason is lenders find it secure in terms of repayment when lending to an employee of a well-established company. Whereas when lending to an employee of a small company they are not sure about the repayment. 

How does it impact a borrower?

Lenders preference for employees of reputed companies grant them with many favours which include:

  • Higher loan amount
  • A comparatively lower rate of interest.
  • Longer tenure for repaying the loan.
  • Several discounts on processing fees & other charges.
  • Some exclusive offers

Let’s understand it better with an example:

Suresh and Mohan both apply for a personal loan with a reputed lender. Suresh is having a monthly income of ₹1 lakh and is employed in a non-listed company whereas Mohan earns ₹70,000 monthly and works in TCS. Now, what happens is Mohan gets approved for the personal loan in a hassle-free manner at an interest rate of 10.56 % p.a whereas Suresh has to wait a bit long for his loan approval. The rate at which his loan got approved is 13. 5% p.a. 

How can you make it smoother? 

If you are working in a Cat C or Cat D company and looking for an unsecured loan/ personal loan, then it is better to apply with an NBFC. This is because NBFCs calculate the eligibility of their customers on the basis of their income and repayment capability, and their eligibility criteria is a bit lenient than that of other popular and renowned banks.