Know How Your Employment Status Can Affect Your Personal Loan Eligibility

Your eligibility for a personal loan depends significantly on your employment status. From your monthly salary to your employer’s reputation, the lender considers all these factors before taking a call on your eligibility to acquire a personal loan. Since personal loans are unsecured loans, lenders put a special emphasis on these factors to understand your repayment capacity.

How Does Employment Status Affect Personal Loan Eligibility?

Here is how your employment status affects your eligibility for a personal loan:

Job Security

A personal loan is a collateral-free loan. Since the borrower does not pledge any asset as collateral, lenders do not have any asset to auction to recover their money in the face of the borrower’s inability to repay the loan. This predicament makes lenders check the borrower’s employment type and whether the job offers security. 

Your job security depends on where you are working. Some lenders prefer public sector employees to those working in top companies because these jobs are very secure.

Employment Duration

Lenders approve personal loans only for those borrowers with at least six months of work experience, indicative of the borrower’s income stability. If your employment history is muddled with frequent job changes, lenders might consider you a risky candidate, potentially leading to the cancellation of your loan application.

Steady Income

It is easy to get a personal loan if you are earning steadily. As part of the personal loan procedure, the lenders will ask for salary slips, ITR and bank statements from the salaried employees and self-employed individuals. Securing credit with uncertain incomes is challenging as lenders assume a higher risk of a payment default.

What Difficulties Happen Without a Proper Employment Status?

Here are some difficulties that you may face if you fail to convince the lender to read your current employment status:

Difficulty in Getting Approval

You need a good source of income to get a confirmation for a personal loan. Lenders do not trust people with unstable employment or no employment. Such borrowers are assumed to default on repaying loans.

High-interest Rates

You may be charged higher interest rates without proper employment. Lenders consider such borrowers risky, amplifying their lending risk and resulting in a higher interest rate on loans.

Limited Options

Uncertain employment gives limited loan options. Lenders are unwilling to sanction a large amount of money to these people. They do not get any beneficiary services either. They might have to pay some extra charges to close out running loans.


A personal loan has become more accessible due to its easy application process. Before completing it, ensure you have provided all supported documents regarding your employment and career. Now that you know the role of employment status in personal loan eligibility, prepare accordingly to get the best offer from the market.

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