Can A New Employee Get Personal Loan?
When you’re a new employee, you start receiving a paycheck for the first time in your life. That’s the first time you think about taking out a personal loan for employee to purchase your dream car, go on a much-awaited vacation, or take care of some long-pending expenses.
However, this euphoria about receiving an influx of money is the only thing that comes easy—acquiring loans has gotten more competitive and harder than before. Fortunately, one doesn’t have to be a financial wizard or stay up until midnight to find ways around the challenging lending conditions. In this blog post, you’ll read about the factors determining if you qualify for a loan and how you can manage your expectations so that you don’t end up in debt.
Can a new employee get a loan? Anyone who works can get a personal loan for employee. The only condition is that they must have a good credit score/financial history and the right documentation. That being said, the conditions determining loan approval are slightly different depending on your current situation. It is especially true for newly employed people who have yet to establish the credit history that those older than them have as proof of good financial conduct. To understand this, let’s look at the factors determining whether you qualify for a loan.
How to qualify for a personal loan for employee
To be eligible for a personal loan for employee, one must have a stable source of income and valid proof of identity. If you have a job, either new or old, producing documents in support of these requirements would not be tough. Aadhaar, a driving license, a passport, or any other government-issued photo ID can be used as proof of identity when applying for a personal loan for employee. For proof of income, you will have to supply your salary slip along with your application for the loan. Banks are more inclined to approve loan applications from individuals with a regular income as they are unlikely to default on their repayment.
Both of these things are easy to provide to the lender when you’re a new worker looking to take out a personal loan for employee. While these factors are important for virtually any loan, they are even more relevant for a car loan or other vehicle funding. For one, you need a reliable source of income. Using your savings or a home equity loan as collateral is no longer acceptable.
Therefore, you need to have a steady and reliable source of income. What is considered to be a good income source depends a lot on the situation you are in. For example, if you are currently self-employed, your income will greatly affect your loan approval.
One also needs a high credit score to be able to get a personal loan for employee. Having a good credit score is not just a matter of luck. Every credit report is compiled based on an individual’s financial history. Therefore, if you have a poor credit score, you can easily improve it by making good financial decisions. One advisable decision would be to get a loan. If you lose the loan or fail to make the payment, at least your credit score will go down. Therefore, a good credit score will help you get a loan and increase your borrowing capacity in the future.
Importance of a good credit score when seeking a personal loan for employee
This is the most important thing that will determine if you get approved for a loan or not. Your current credit score is the number that lenders see when you apply for a loan. Although this number might look silly to you, you must take note of it. There might be more than one factor that will determine your credit score. The three main factors that lenders use to determine your credit score are payment history, the amount owed (or the amount you owe), and how long you have paid them (or how long you have paid off your debts). It is important to note that your credit score will change depending on the information you provide. Therefore, you should be careful while filling out your application for a personal loan for employee.
How to pay back the loan when you’re newly employed?
If you’re a new employee just starting at your job, you have limited financial resources to pay off the loan that you are taking. Here are some tips to ensure that you pay the EMIs on time.
One, take a small loan. Don’t try to maximise the loan amount. Instead, try to reduce it as much as possible so that the EMIs you must pay are minimal. Small EMIs are easy to manage when you have other commitments, like rent, to manage.
Two, pay the EMI as soon as you receive your monthly salary. Doing this will help you keep a check on your expenses. Moreover, having paid the EMI at the beginning of the month, you will have a measure of how much you can spend through the month without falling short on other commitments, such as rent and utilities.
Three, when taking a loan, check if there is a repayment moratorium. If your lender has such a scheme, you must take advantage of it, as this could give you a year or two, depending on the plan, to create a reserve that you can dip into when you start paying the EMIs at a later date.
Four, pay off the loan early if you can. Doing this would free you up to take on other commitments—investing in stocks, for example. You may have to pay a small fine when paying off your loan before the tenure, but this would be far less than the money you would save in terms of interest that you will not have to pay.
Five, ensure that you’ve read the terms and conditions presented to you by the lender. In many cases, you can negotiate better terms. For example, you can spread the EMIs over a longer period to ensure you have more time to pay off the loan.
Summing Up
You’re eligible to seek a personal loan for employee when you start working. Given that you have a source of regular income, you can take out a loan and pay the EMIs on time. However, before you jump into it, read about the different factors that will help you determine if you can qualify for a loan and how you can manage the loan so that you don’t end up in debt or have a bad credit score because of it. Moreover, when taking a loan as a young professional, you must ensure that you’ve found the lender most suited to your needs. For instance, young individuals can consider Piramal Finance, known for its flexible loan options and relaxed eligibility rules.