Will Your Employment Status Have Impact on Your Personal Loan Approval

Your job history and the type of job that you do can affect the approval of your personal loan. Risky jobs and jobs that do not provide documented proof of your pay can affect the loan approval negatively. The following are 5 types of employment status that can affect your loan approval negatively.

1. Job Hopping

Changing job frequently can be a red flag to the lender that you are someone who is unstable in your finance. This could be changing job every 6 months or every year or every 2 years. The bank will think that you are someone who will just keep changing job after the loan is approved and that you may eventually end up without a job.

2. Get Cash for Payment When Working with Proprietorship Company

People who work with proprietorship companies and get their salary in cash will have difficulty getting approved for a loan. This is because there is no way to prove that the money you receive is from the company that hires you. You may be earning a high salary by working with a proprietorship company but the bank wants documented proof of earning in order to approve the loan. The solution is to ask your hirer to pay you in check or deposit the funds to your bank account.

3. Work on Contract

Those who are employed full time with a company will have a higher chance of loan approval. The lender may not approve your application if you are working on a contract. The reason why people working on a contract has lower chance of loan approval is because the lender sees them as borrowers who have irregular income. The bank cannot predict with certainty how long you will continue the job on contract. They don't want to take risk by lending to borrowers that are likely to not pay back.

4. Inadequate Job Experience

Having not enough job experience can also be an obstacle when you are applying for a loan. Most lenders would like to see that their borrowers have at least 1 year of job experience. Some lenders may consider to approve your loan if you just start a job but they are going to charge you a higher interest rate. It is wise to wait for at least 1 year when you have an adequate work experience to prevent getting a rejection for the loan application.

5. Dangerous Jobs

Doing dangerous jobs, for example, firemen, or a worker at a high rise building construction site can reduce the chances of your loan getting approved. The lender will see you as someone that can die at anytime due to the dangerous condition of your work place. It will be hard to get approved for the loan if you don't have any insurance that offers coverage for your job. Switching to an office job will be able to change your grade from high risk to low risk.