Sunday, 16 August 2015

How does your employer status decide your loan eligibility?

Rahul, working with Tata Consultancy Services earning Rs 25000 per month needed money for his sister’s wedding. Hence he applied for a personal loan and the bank approved his loan at an rate of interest (ROI) of 13%. After some days, his friend Aman faced a money crunch. Aman, working with 3i Infotech and earning Rs 50,000 per month when applied for a personal loan in the same bank, his loan got approved at an interest rate of 15.5%. The rate of interest quoted by the bank to Aman was higher though he was earning more than Rahul. So, what was the metrics behind this calculation? It was nothing else but the company they were working for that decided the rate of interest. 

Banks in India have segregated companies into listed companies and non-listed ones. These are divided into certain categories basis the company profile. For some financial institutions, the categories are Super A, Cat A, Cat B, Cat C, Cat D, etc. and for others these are named as Diamond, Platinum, Gold, Silver, etc. The employees of these companies are counted as creditworthy by the banks and are considered eligible for lower ROI and more loan amount than the employees of non-listed companies. Non-listed companies are the ones that are not recorded anywhere. The employees of the Super A / Cat A companies are considered as ‘Hot Leads’ by the banks and enjoy special offers from these financial institutions as compared to the employees of Cat B / Cat C / Cat D / Non-Listed ones.

This is the reason Rahul was considered a hot lead as compared to Aman and offered a lower interest rate. I hope we have the basics clear now. 

Effect on loan eligibility:

Your employer would also be a crucial factor in deciding whether you are eligible for a loan or not. The benefit of working in a listed company is that you pass the eligibility test even if your salary is as low as Rs 15000 per month (This amount differs for Tier1 / 2/ 3 / 4 cities). The customers enjoy lower interest rates, exemptions in the processing fees and longer tenures if they fall under some listed company. According to the statistics, out of these categories, Super A, and Cat A avail maximum offers. For instance, if there are a total of 33,000 companies listed with a financial institution, then out of this only 1100 are Super A and Cat A organizations where workers appreciate unique offers. Moreover, just 50 of these 1100 recorded organizations enjoy the benefits of the interest rate being as low as 13% that is the minimum provided by any bank. Employees of Super A companies in some cases may also avail lowest interest rates that is 11.99% or 12.99% if there is an ongoing scheme.

The special offer list includes the employees of TCS, Capgemini, Accenture, Wipro, and Infosys with a reserved rate of interest of 13% irrespective of the income of the employee. These clients additionally get a markdown in the processing fee if their salary is more noteworthy than Rs. 50,000 per month. The list also has some large pharmaceuticals firms like Cadila, Reddy, Cipla, Sun Pharma, Ranbaxy. The employees of these companies can even get more loan amount as compared to others. Other firms falling under Super A or Diamond category are Deloitte, L & T, Mahindra & Mahindra, Samsung, Syntel, Vodafone, etc.

To conclude, whenever one is looking for an unsecured personal loan, you must know what category your company falls into. If you are working in a non-listed company, you must go for an NBFC to fulfill your financial needs because banks will not lend you more than Rs 1.5 lakh even if you are earning Rs 1 lakh per month. But NBFCs calculate the eligibility of these customers basis their salary and repayment capability. NBFCs have also defined some rules and criteria to check a customer’s loan eligibility. For example, Bajaj Finserv has its company category list, and the salary rules differ accordingly. If you are living in a metro city, the salary criteria would be different than for people living in Tier 2 / 3/ 4 cities. The credit history and the profile of the customer are also considered while approving the loan. 

Fullerton India, another NBFC, considers the eligibility on the basis of the salary, the bank balance and credit history of the customer. It does not take into account the employer status of the client. 

Job stability counts:

When you apply for a personal loan, your job stability also plays a significant role. Banks and NBFCs consider those employees eligible for the loan having an experience of minimum one year. But again Super A and Diamond companies come as an exceptional case. For instance, a Super-A employee would get a loan quickly even if he/she has joined the company 1 month back. But if one is working in some other company, then one year experience is a must. 

Your employer status is a vital element of your loan application. A customer always looks primarily for two aspects, loan amount, and interest rate. Your employer status affects both of these. To conclude banks are the best for the employees of listed companies, and NBFCs prove to be better for non-listed companies' employees.

Author is promoter and CEO of dialabank

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