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Working professionals who frequently shift jobs may face consequences of short-term employment stability in acquiring the desired loans with the best interest rates.
How your job switch influences your loan eligibility. (Representative Image)
Job switching may be a common exercise among individuals eyeing better work cultures and higher pay packages in their professional careers, but this transition has a complex relationship with personal loan approval and other credit line opportunities. These complications arise based on potential employment discontinuity and the lack of job stability endured by an aspiring loan applicant, which is then heavily scrutinised by the lending institution.
Before permitting a loan, a financial institution will always weigh in your job profile and verify several factors associated with your professional life. One of the most important metrics here is employment stability. Frequent job switching can plague an individual’s loan approval processes, especially for candidates with a low credit score and a history of EMI defaults and financial distress.
“A first change of jobs is an interfering factor in getting a personal loan approved, as intermediaries closely scrutinise income and employment continuity. People have generally been accepted with employment rarely shorter than six months—it is thought that job-hopping can be viewed as financial instability,” Mukesh Pandey, Director of Rupyaa Paisa, told Mint.
“A good credit score, very low debt-to-income ratio, and strong repayment history could help allay some concerns that are considered in favour of approval.”
Lending institutions tend to favour loan applicants with at least six months of ongoing service in their existing jobs. Regularly switching jobs is considered a red flag and a sign of financial instability. Therefore, the length of your work tenure could play a decisive role in acquiring a specific loan with better interest rates.
However, changing jobs doesn’t necessarily indicate dwindling eligibility. If your new employer brings to you higher income and improved career prospects, the switch can boost your chances of bagging the desired loan value as long as you maintain a respectable credit utilisation ratio. Lending institutions analyse your net income patterns and past loan repayments, which directly impact your overall credit score.
If the benefits could be sustained, switching to a job that provides a pay hike is seen in a positive light by financial institutions. Low debt-to-income ratio and timely repayments also help compensate for the pitfalls of shorter employment terms. Focus should be on avoiding missed EMIs. Individuals eyeing the best loans are advised to maintain a stable career trajectory, demonstrate consistent income and responsible financial activities.
A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al…Read More
A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al… Read More
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