When you apply for a personal loan from a bank or NBFC, not only your credit score or income, but also your work experience and job tenure are crucial.

Banks want to see how stable your employment is, how long you've been working, and how stable your income is. If you frequently change jobs or have long gaps in your employment, banks may consider your loan application "risky."

What impact does work experience have on personal loans?

Each bank evaluates your job history in its own way during loan approval.

Positive impact: When there's both experience and stability
If you have 2-3 years of continuous experience and have been working at the same company for the past year, the bank's confidence in you increases. Having a good job and a high salary lowers your Debt-to-Income Ratio (DTI), which increases your chances of loan approval. If you recently switched to a stable sector or a government job, this also works in your favor.

Negative Impact: Frequent Job Changes
If you frequently change jobs, banks consider you "unstable." This increases the likelihood of loan rejection or higher interest rates. If you're on a probationary period in your new job, banks generally don't approve loans.

When does a job change have a positive impact on your loan?

Not every job change is bad. If you've secured a higher designation and a higher salary in your new job, it's a good sign for the bank. Benefits:

High Cash Flow: A higher salary means you have better EMI repayment capabilities.

Low DTI Ratio: A Higher income lowers your Debt-to-Income Ratio.

Stable Employer: If you've joined a stable company, such as a manufacturing, public sector, or MNC, your chances of loan approval increase.

When does changing jobs negatively impact your loan?

In some cases, changing jobs can be counterproductive, such as:

Frequent Job Changes: Changing jobs every few months signals to the bank that your income isn't stable.

Long Career Breaks: If you've taken a long break, banks may consider you a "High-Risk Borrower."

Probation Period: If you're currently on probation, banks typically delay loan approval.

How to Increase Your Chances of Loan Approval?

Stay in your job for at least 1-2 years.

If you change jobs, only for a better position and salary.
Don't leave a large gap between jobs.
Apply for a loan only after your probation period is over.
Keep your credit score above 750.
Pay EMIs on time to build a strong repayment track record.
Work experience isn't everything; overall eligibility matters.
Loan approval doesn't depend solely on work experience. Banks also consider several other factors. If you meet all these criteria, loan approval becomes easier. These are:

Credit Score
Debt-to-Income Ratio (DTI)
Income & Age
Employment Stability

Conclusion
Work experience and job tenure play a significant role in your loan eligibility. If you've been working consistently for a company, pay your taxes on time, and have a good credit score, banks will readily approve loans. Remember, financial stability is the strongest foundation for loan approval.

Disclaimer: This content has been sourced and edited from Zee Business. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.