With the easing of COVID-19 restrictions and a gradual improvement in the economy, personal loans for salaried employees have gained significant popularity as a means of obtaining financial assistance. Among the various borrower segments, salaried employees have emerged as a leading force driving the growth in personal loans. Let’s delve into the reasons behind this trend and understand why salaried employees have a higher likelihood of qualifying for instant personal loans, as supported by recent statistics released by the Reserve Bank of India (RBI).
The Boom in Personal Loans
The Reserve Bank of India (RBI) has released data from 2020, shedding light on the impressive growth of personal loans in India. The total value of personal loans witnessed a significant year-on-year increase of 11.2 percent, reaching a staggering amount of around Rs.25.31 trillion by the end of July 2020. Notably, this surge in personal loans was primarily fueled by the salaried segment, which experienced a substantial growth rate of 13.3 percent year-on-year, totalling approximately Rs.7.22 trillion. This data highlights the robust expansion of personal lending in the country, especially among salaried individuals.
Why Salaried Employees Have the Advantage:
1. A Steady Income Source
Salaried employees enjoy the perk of having a stable and predictable income stream, thanks to their regular paychecks from their employers. This financial stability is seen as a positive sign by lenders, assuring them of the borrower’s ability to repay the loan on time. Consequently, salaried individuals are considered less risky borrowers, making it easier for them to qualify for quick personal loans.
2. Employment Verification
Banks and financial institutions often require employment verification as part of the loan application process. Salaried employees have it relatively easy, as they can provide tangible evidence such as payslips, employment letters, or income tax returns to substantiate their income stability and job security. This verification process aids lenders in assessing the borrower’s repayment capacity, increasing the chances of loan approval for salaried individuals.
3. Lower Default Rates
When it comes to borrowing money, there’s an interesting trend among salaried employees. They seem to have a better track record of paying back loans compared to other groups of borrowers. This statistical fact hasn’t gone unnoticed by lenders. They take this historical data into account when they review loan applications because it suggests that salaried employees are more likely to repay their debts.
The lower default rates among salaried employees actually work in their favour. Lenders see them as more trustworthy and reliable borrowers, which in turn, improves their chances of getting approved for a loan.
4. Convenient Salary Deductions
Many employers facilitate loan repayment by deducting the monthly instalments directly from the employee’s salary. This arrangement provides an additional layer of security for lenders, as they can rely on the borrower’s employer to ensure timely repayment. Such streamlined repayment processes further boost the likelihood of loan approval for salaried employees.
5. Existing Banking Relationships
Salaried employees often maintain longstanding relationships with banks through salary accounts and other banking services. These pre-existing connections can work in their favour when it comes to loan approvals. Banks are more familiar with the financial behaviour and creditworthiness of their salaried customers, expediting the loan approval process and improving the chances of qualifying for instant personal loans.
6. Employer Tie-Ups
Numerous lending institutions have established partnerships with various companies and organizations, creating a valuable opportunity for their employees. Through these collaborations, lenders can provide exclusive loan products and perks specifically tailored to benefit individuals associated with these organizations. This means that salaried employees working for companies that have such tie-ups can enjoy access to specialized loan schemes and enjoy reduced interest rates. Consequently, their likelihood of qualifying for personal loans is significantly enhanced.
It is no surprise that salaried employees are more likely to qualify for instant personal loans. Their steady income and employment make them less of a risk for lenders, which in turn makes it easier for them to secure loans quickly. However, this doesn’t mean that self-employed individuals or those with irregular incomes cannot get approved for loans. They just need to do some extra legwork and show their financial stability through other means like savings accounts or good credit scores. Regardless of your employment status, it’s always important to shop around and compare loan options before making a decision. With the right research and preparation, anyone can find a loan that suits their needs.
Author Bio: Shikha Ahuja is part of the content marketing team at KreditBee – India’s fastest personal loan platform where professionals can easily avail of personal loans in just a few minutes when in need of quick funds. Shikha writes to create awareness amongst her readers on topics related to loans, personal finance, and budgeting. Being a part of the FinTech industry keeps her on her toes, but she keeps herself grounded through yoga and meditation, and loves to host game nights during the weekends.