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Personal loans for salaried individuals have become a prime focus for banks. Unsecured credit, such as credit cards and personal loans, is available to customers based on their regular income and profile. To keep the default ratio low, Banks refer to CIBIL to assess customers’ credit management abilities before issuing credit.
CIBIL records credit usage details, including a history of loans and credit cards used, along with repayment status. Your CIBIL score is a major factor in determining your eligibility for a personal loan, and a healthy CIBIL score of 720 points or above is the key to getting an instant personal loan.
Keeping your CIBIL above the required benchmark is essential, so be wary of the following scenarios. Let us look at the situations that can lead to a CIBIL downgrade.
Millennials, with a fresh start in employment and a sudden surge in income, begin living an aspirational lifestyle. Individuals employed by reputable companies and earning high incomes are offered credit cards with generous credit limits.
Overuse of credit cards can easily occur if expenses are not controlled. Without realising that all credit comes at a cost, individuals soon find that expenses have overtaken their income.
Cardholders soon find that their debt has increased manyfold if they are unable to clear the bill by the due date. As they try to solve the financial crisis, they look for ways to alleviate credit card debt as:
The request for a personal loan is denied due to unpaid dues on multiple credit cards, as reflected in the CIBIL report, because the credit card debt-to-income ratio is high.
App loans seem like an easy way to secure credit for immediate funding needs and have become popular due to their accessibility and quick processing. Customers find it convenient to get small amounts to cover immediate expenses through a mobile phone interface. Check the illustration below
Hema needed ₹ 50k to pay her credit card bill. Her expenses had been high for a month due to a family wedding. An offer on her phone for instant funds through an app seemed like the answer. She clicked the apply button, accepted the terms, and soon the funds were in her account. This seemed like an easy way out, and she needed an additional ₹50k to be comfortable, which was processed through the app again.
The App loan, however, was not an ideal solution; not being aware of the terms and conditions can be contrary to your financial well-being due to the following:
App loans are frowned upon by Banks due to predatory lending and high costs. Shorter tenors and higher interest rates, with hidden charges, can increase debt. Therefore, personal loan requests from customers with existing App loans are viewed negatively.
To achieve further transparency and a more comprehensive check, CIBIL also records the number of credit applications submitted for various credit types, including loans, credit cards, and consumer loans. Credit enquiries conducted over the years will always appear in the CIBIL history. If the application for the personal loan or credit card is approved, the status is reflected as a running loan.
Lenders view CIBIL enquiries as the number of attempts an applicant has made to secure credit and the number of times they have been granted credit. Applicants seeking a loan should check their eligibility for a personal loan, a secured loan, or a credit card, and, if eligible, before applying, provided their employer is on the Bank’s approved company category list.
Excessive enquiries have a negative impact on the CIBIL score and history due to the following:
Trying to get the best deal by forwarding applications to multiple lenders can have a contrary effect, as the lender will check your CIBIL record and may decline your application due to excessive CIBIL enquiries.
In conclusion, prior to the existence of CIBIL (Credit Bureau of India Ltd.), banks relied on their own customer experience to verify applicants’ credit status; now that credit records are available, a CIBIL check is mandatory. A satisfactory credit rating and repayment record will go a long way toward securing credit.
Personal loans are unsecured credit extended to customers for personal use and repaid within a fixed term. To keep the default ratio low, banks allocate funds to applicants who meet the eligibility criteria and have a history of meeting their financial obligations on time.
The CIBIL (Credit Bureau of India Limited) records and maintains credit transactions of individuals and issues them a score based on their Creditworthiness. Banks and NBFIs check CIBIL before extending further credit. They refer to CIBIL to verify the following:
Further Loan amounts are issued to the applicant based on the existing dues and financial eligibility to pay the additional EMI.
A 0 or -1 CIBIL score indicates that you have either not availed of credit or do not have sufficient credit history. You can apply for an HDFC Bank Personal Loan or an ICICI Bank Personal Loan.
The HDFC Bank eligibility criteria for applicants with a 0 or -1 CIBIL include the following:
The eligibility criteria required for an ICICI Bank personal loan with a 0 or a -1 CIBIL score:
A CIBIL score of 750+ is considered healthy and should make the applicant eligible for a personal loan. Below are instances when a personal loan can be rejected despite a good score.
Customer is overleveraged: An applicant is considered overleveraged if:
The CIBIL score may not be affected if dues are paid on time, but the request for additional funds may be denied.
The employer is not approved: The company a customer is employed with forms an essential part of personal loan eligibility.
Verification is negative: Customer verification is an essential part of the KYC regulations for issuing credit. Lenders perform a Video KYC and, if required, a physical verification at the applicant’s residence or office to verify the authenticity of the information submitted.
If verification is not completed, the Personal Loan request is denied, even if the applicant’s CIBIL score is above the required benchmark.
Incomplete Documents: A personal loan is a collateral-free loan; it is processed based on the customer’s profile and the documents submitted, such as proof of income and KYC documents. A good CIBIL score will ensure personal loan eligibility, but if the required documents are incomplete or unavailable, the personal loan request will not be processed further.
Private Banks offer personal loans as short-term funding with reasonable interest rates. As personal loans are offered without collateral, keeping the default ratio low is a challenge for most private Banks. CIBIL history and records help identify customers with higher CIBIL scores and a smooth repayment history. Although banks require a CIBIL score of 720+, each case is assessed on its own merits.
NBFCs (Non-Banking Finance Companies) are similar to Banks, as they are also licensed to provide secured and unsecured credit in the form of loans. Banks and NBFCs set their own eligibility criteria and lending terms.
NBFCs that offer personal loans actively are:
NBFCs also require a CIBIL score above 700 and do not issue personal loans to applicants without a credit history. If you have a low CIBIL score, NBFCs do give some allowances, as compared to banks, based on the following:
Overleveraged Customer: If you are currently running 6 to 7 loans and your existing EMI exceeds the permitted income-to-EMI ratio, a Bank will decline your personal loan request as overleveraged. Whereas with NBFCs, you can transfer the principal balance of your existing personal loans to an NBFC. With a balance transfer, your EMI will decrease, reducing an excessive financial burden and increasing your eligibility for the required personal loan amount.
CIBIL inquiries: Each time a customer applies for credit, the lender forwards an inquiry to CIBIL to check their existing CIBIL score, credit history, and credit lines. These inquiries will appear in your record, indicating the number of applications you have forwarded for a loan or credit card. Lenders view too many CIBIL inquiries as a warning that the customer is credit hungry, planning to apply for credit from multiple lenders simultaneously. Banks do not process a personal loan application if there are more than 3 credit inquiries on CIBIL in the past 3 months. Still, NBFCS accepts 6 to 8 inquiries, allowing the applicant to apply.
Application Score: is a value assigned to the customer’s details in the personal loan application form. NBFCS, such as SMFG Finance, use an Apps score before processing a personal loan application. If the customer details score above the required benchmark, the application proceeds; if it does not, it is declined. If the customer’s CIBIL score is low but the Apps score generated from other information is sufficient, the customer may still be eligible for a personal loan despite the low CIBIL score.
Need funds for wedding expenses? Or falling short of the amount required to complete furnishing your home? Personal loans are readily available from Banks and NBFCs for emergencies and personal needs.
Banks and NBFCs are both registered institutions licensed by the Reserve Bank of India to provide financial and lending services in the form of
There are key differences between the functioning and facilities of a Bank and an NBFC that influence the criteria for providing credit.
Knowing the eligibility criteria and benefits of Banks and NBFCs are essential to choosing a suitable option for your personal loan requirements.
A personal loan from a Bank or an NBFC, the decision will depend on the following inputs:
HDFC Bank, the leading personal loan provider, offers existing customers the option to access funds for individual use through a Top Up. A personal loan top-up is a convenient option for HDFC Bank personal loan customers. The existing personal loan gives the customer leverage with the Bank and helps speed up the process for additional funds.
To get a top-up on an existing personal loan, the applicant should fulfil the following eligibility criteria:
Income: The applicant should be earning a regular income of ₹ 30000/- and above, transferred electronically to the salary account every month.
Company Category: The applicant’s current employer must appear on HDFC Bank’s list of approved companies for personal loan sourcing.
CIBIL Score: The applicant’s CIBIL score must be above the required benchmark of 720 points, and the applicant must have no recent credit.
HDFC personal loan track: The EMI repayments for the existing HDFC personal loan should be made as per the schedule without delays or defaults.
Financial Eligibility: The applicant should be eligible for additional loan amounts as per the HDFC Bank multiplier and FOIR (Fixed obligations versus income) calculations.
Existing credit dues: The credit card dues and EMI for other loans must not exceed the eligibility criteria requirements.
Gap period: To Top Up an existing personal loan, the HDFC Bank requires a gap period of 3 months or more, particularly if you do not have a good credit score.
After your request for a top up has been approved, your personal loan will change as follows:
The interest rate for your personal loan post a top up will depend on the following factors:
A Top Up works well for applicants needing funds on an urgent basis, whereas if the HDFC Bank personal loan interest rate has increased or you have repaid the major part of your primary loan, an HDFC Bank parallel loan is a good option.
A credit score or CIBIL history check has become a vital part of the lending process. Lenders will request your credit report from CIBIL before proceeding with your Personal loan application. If your score does not meet the necessary benchmark, your request can be declined.
A numeric score is issued by CIBIL, ranging from 300 to 900 points, based on an individual’s credit usage. A credit score of 720 points and above is considered a healthy score by banks for issuing credit. Depending on the repayment history and credit usage, you are issued a score by major bureaus recording credit transactions, which can be interpreted as follows;
600 to 650 points: if your credit score hovers between the 600 and 650 mark, this means:
A score of 600 to 650 points is considered below average by lenders, and obtaining further credit may be difficult.
650-700 points. Any score above 650 points is a fair score, though the lender will look into the details of the credit history for the reason for the dip in score, which could be any of the following:
700-750 points: Although a 720 CIBIL score is the required benchmark by Banks, any score above 700 points will make you eligible for a personal loan.
750 points and above: A CIBIL score of 750 points and above is the mark of successful credit management.
If you need additional funds as a personal loan and are currently facing rejections due to a low credit score, you can avail of the following options:
Apply to a Bank with an account or a credit relationship: If you have an account with a Bank and maintain a good balance, or have previously repaid credit successfully, apply for a personal loan online; the chances are that the credit team might approve a personal loan.
Apply for a smaller amount or choose an NBFC that charges higher interest rates: If you know your credit score is lower than needed, there is no point in applying to other lenders, as this can further damage your credit score. Seek an NBFC that provides unsecured loans with lower credit score requirements, even if the interest rate is higher, as this will help you overcome your cash flow issues.
Apply with a co-applicant: A guarantor or a co-applicant with a good credit rating and income can strengthen your Personal loan application. As a personal loan is unsecured funding, having a co-applicant with a healthy financial track record can reassure the lender that the repayment will be made on time.
Apply for a Personal loan against securities or fixed deposits: If you hold funds in fixed deposits with a Bank, it will strengthen your personal loan request. Banks offer up to 80% as a loan against the amount held as a deposit or security. Banks are reassured that they have funds in safekeeping to recover the loan if required. Therefore, the clause of a downgraded CIBIL score will be overlooked.
Check your credit score regularly: Do not let it come as a surprise; a free credit score check is readily available at www.CIBIL.com. It is helpful to check your credit score before applying for further credit to understand your current standing. In case there is an error, you can take steps to rectify it.
Circumstances may have led to a fall in your credit score, but all is not lost. Take the following steps to get your credit score back on track.
Repay pending dues: Clear outstanding accounts by paying outstanding amounts and closing them.
Transfer credit card dues: Apply for a balance transfer of credit card dues via an AXIS Bank personal loan to avoid paying an inflated interest rate. The loan amount can be repaid easily with a reasonable EMI.
Timely EMI payments: Ensure there are sufficient funds in your account to clear the EMI for existing loans.
Rebuild your CIBIL score: Take steps to rebuild your credit score by applying for a secured loan and making timely repayments.
Usage of unsecured credit: Work on increasing your score by using your credit card judiciously and paying off the balance on the due date. Regular usage of a credit card with timely payments can help to increase your score quickly.
Keep your debt-to-income ratio intact: Avoid excessive credit use, live within your means, and create a budget to ensure you have the funds on hand to repay the credit you use.
Getting over a bad credit phase and improving your credit score are not easy. To give individuals an opportunity to improve their current credit rating, the RBI (Reserve Bank of India) has instructed credit rating agencies to remove details of accounts that are more than 7 years old.
The availability of credit in the form of unsecured finance and mortgages from banks and NBFCs is changing the lifestyles of salaried individuals.
Individuals earning a high income no longer have to wait to own their own home or furnish it with the latest accessories; a home loan or a personal loan can easily provide the funding needed to repay it conveniently via monthly instalments. Credit cards enable instant payments for retail goods and fine dining.
Lenders have, over the years, identified segments and behaviour patterns of individuals who use credit responsibly and repay dues on time. Primary factors include employment with organisations on the Bank’s approved company list and the individual’s previous credit usage. These factors will further influence eligibility for additional credit.
You may have recently experienced a credit default. Will your company category help override this, or will a healthy credit history enable you to receive the funds you need? A detailed comparison of both these factors will help create a better understanding:
To classify companies for lending purposes, banks have published their own approved lists of companies for loan and credit card sourcing. Companies on the list are stable, profitable, with high turnover and substantial assets. Banks issue their own company category list, such as:
A credit score is a three-digit number that indicates an individual’s creditworthiness. Credit bureaus operating in India include:
The Credit Bureau of India Ltd (CIBIL) score is used by most Banks to assess an individual’s credit usage. The score ranges from 300 points at the start to a maximum of 900 points. A score of 720 or above indicates a good repayment record and eligibility for credit.
Employment with an approved company signifies that the applicant has job stability and a regular income.
Your credit history is the record of the loans and credit cards allotted to you and the repayment details. Credit bureaus like CIBIL will assimilate and reflect the following in your credit history:
Based on your credit history, CIBIL will allot you a credit score. Most banks require a credit score of 720 or higher to qualify for a personal loan. Your credit score and history will determine your eligibility for an unsecured personal loan, a credit card, or a mortgage.
If there are any delinquencies or delays in your CIBIL history, or your CIBIL score is
Leading Banks such as HDFC Bank, ICICI Bank, and AXIS Bank will process a personal loan request if your company is included on the Bank’s approved company category list.
Before applying, it is advisable to check whether your company is on the approved list of banks to avoid delays. Applicants can check the company category online on the Bank website before submitting documents, or forward your query to us at www.yourloanadvisors.com.
Apply for a personal loan after using the Personal loan eligibility calculator to check the amount you are eligible to get.
The HDFC Bank company category list, the ICICI Bank company category list and the Axis Bank Approved List of Companies are exhaustive lists of companies approved to source unsecured loans and credit cards.
You should check if your company is approved before applying for a personal loan. If your company appears on the approved list, the Bank has confidence that you have stable employment and can pay your dues on time. Loan applicants benefit as follows:
Your CIBIL score reflects your credit management and plays a crucial role in the processing of a loan request. CIBIL assigns scores from 300 to 900 based on your credit usage. When you apply for credit, the lender will first review your credit score and history.
Cashless spending has become the norm; payments are made digitally or via credit or debit cards. Building a CIBIL score is now mandatory. With a bank-issued credit or debit card, purchases can be made on EMI, helping to develop a CIBIL score.
It takes 12 months of regular credit usage for CIBIL to issue a credit score. If you are new to credit or do not have the required length of credit history, you are eligible for a personal loan from;
If you are employed with a company that does not feature in the personal loan company category list of any Bank, you have the following options:
In conclusion, your company profile and CIBIL score are the two primary variables lenders consider when issuing a personal loan. Although all salaried employees look forward to working with a listed company, changing employers may not be easy if a non-listed company employs you.
Whereas regular credit usage and timely repayments are achievable. Make sure to build a strong credit profile so you meet the personal loan eligibility criteria for an instant personal loan.
Going back a decade, when Private Banks opened up to providing unsecured credit, the concept of credit cards and personal loans was new. Customers used credit freely, with little knowledge or discipline regarding repayment terms, taking for granted that the payments could be cleared at their convenience. They could shift from one lender to another as the data was not shared.
With the introduction of CIBIL (Credit Bureau of India Ltd), banks now report all credit and repayment transactions of borrowers to CIBIL. CIBIL maintains individuals’ and companies’ credit histories and repayment records and issues a CIBIL score. This information is shared with lenders, who assess a borrower’s current and past credit history before sanctioning credit.
The past defaults and delays may have been due to the simple shortage of funds or any other reason, which includes:
A return of the EMI due to a change of account: If your salary account changes, the Bank should be informed in advance of the shift to the ECS mandate. If the Bank is not notified in time and there are insufficient funds, the EMI will remain unpaid and will be reflected in your credit history.
Loss of Employment: If you have lost your job, the EMI will still be presented to your account on the due date. It is advisable to arrange funds from other sources and maintain a sufficient balance in your account to clear the EMI. If you have outstanding credit card debt, pay the minimum balance by the due date to avoid default.
Delay in salary credited: The EMI will be credited to the salary account on the due date. It is advisable to keep one month’s instalment as an advance in case the employer does not credit your salary on the assigned date, the EMI will be marked as unpaid.
Unable to manage finances properly: If the expenses have increased due to unplanned expenditures, and you have made extensive usage of your credit card, individuals who are unable to manage their finances in such situations are liable for default.
Clerical and recording errors: Unaware that there is an error in your CIBIL report? This may only come to light when you apply for a loan, the default error could be due to a wrong match or faulty reporting by the lender. Whatever the reason may be, this could affect your CIBIL score unless it is resolved.
Credit score drops: CIBIL updates your credit transactions and revises your score every 30 to 45 days. Lenders notify CIBIL when EMIs are credited, and credit bills are cleared. Delays, defaults, and unpaid dues are also reported. The score is revised, upgraded, or reduced based on these factors. If your CIBIL score drops below the acceptable mark, lenders may not grant you credit, or funds may be given at a higher interest rate.
The credit history cannot be changed: regardless of the reason for the EMI return or delayed payment on your credit card, it will be reported to CIBIL. The return of EMI on your home loan or personal loan will always be reflected in your track record and cannot be mitigated. It will remain in your history.
Excessive bounces will result in a denial of further credit. When you apply for a Personal loan or a home loan, your credit history will reflect the repayment history of your existing and used loans. If your EMI has been returned unpaid and/or delayed, an infrequent bounce can be overlooked, but a continuous string of defaults or delays is cause for concern.
Credit cards overdue: Your credit card balance must be repaid on the due date; any outstanding balance will incur interest of 36% to 42% annually. The balance owing on your credit cards will reflect in your CIBIL history. If it is above the permitted limit, you will be denied further credit due to overleveraging.
Collection and legal action: Continuous non-payment of your EMI or credit card bills will invite reminders by the lender. If they remain unpaid, collection agents will contact you to resolve your overdue unsecured credit, such as credit cards and personal loans. At the same time, legal action can be initiated for mortgages that include home loans and auto loans.
Other effects: The CIBIL score is now recognised as an essential benchmark not just for issuing financial products, but also as a personal assessment of an upright and responsible individual. If you have a good CIBIL score, it will not only make it easier to get credit when required but also open many doors at the professional level.
Reset of your Credit records: You cannot change your past credit history as recorded by CIBIL, but you can always work at making a fresh start. If you have defaulted, settled, or have a record of delayed payments, the CIBIL now removes the details of the negative records from your history after 7 years. This does not mean that your debt has been cleared, but it gives you a chance to rebuild your score.
Try to clear the previous debt: If your financial situation improves, it is the best solution to repay the amount due and clear your debts. Repaying the amount owing with interest will close the account and have a positive effect on your CIBIL score, while not paying the interest due will mark the status as settled. A settled account will deny you further credit from the lender and hamper your CIBIL score.
Restart your history with commodities: Landed with a poor CIBIL score, do not wait until your need for a loan gives you stress. Start rebuilding your score by purchasing commodities with your Credit or Debit card, convert the spend into EMI, and make sure you repay the instalments on time.
Apply for a secured credit: a Gold Loan or a Loan Against Property, which requires a lower CIBIL score due to the security provided, can help you get the finance you need and improve your CIBIL score. A personal loan against a fixed deposit amount with a Bank is also issued for emergency needs.
Look for a successful relationship: A lender with which you have a salary account, with a good average bank balance, or have an existing or closed credit card or loan with an on-time repayment track, can issue you further funds based on the same. Your CIBIL score may be overlooked as you have maintained a good repayment record with the lender.
In conclusion, it is not just your CIBIL score that the Bank considers when issuing you credit; your credit history is also taken into account. If you miss a payment, try to clear the amount as soon as possible, as the repayment period is also mentioned in the credit records. Managing your finances well and making arrangements in advance to cover shortfalls and pay your credit dues on time is the roadmap to maintaining a sound credit history.
A Personal loan is characterised as quick funding for personal and emergency needs. Individuals apply for a personal loan, assuming the loan amount they apply for will be available as required. This is not always the case, as Banks have their norms and guidelines to follow and will process the request accordingly.
Choose your lender wisely and apply for a personal loan to the most suitable lender who will fulfil your requirements. Although primary Banks issuing personal loans, such as HDFC Bank, ICICI Bank, YES Bank and AXIS Bank, have their own policies, the basic criteria remain similar. Taking note of the following will help you expedite the processing of your personal loan and avoid undue delays or a decline.
Banks value the relationship and will process a personal loan as a priority. Applicants with an existing personal loan can apply for additional amounts, known as a Top Up. A pre-approved personal loan is also offered to eligible applicants. An association can be in the form of:
HDFC Bank processes personal loan applications from employees of companies included in the Approved Company Category List. Applicants employed by a non-listed company can apply for a personal loan with YES Bank or an NBFC such as Fullerton India and INCRED finance. Check the following employer details before applying:
Documents form the basis for processing a personal loan issued without collateral. Applicants can submit documents online from their official email ID or provide self-attested hard copies.
The CIBIL score is a rating issued by CIBIL (Credit Bureau of India Ltd.) based on an individual’s credit history and usage. Lenders view the CIBIL score and history before issuing further credit.
Further credit is issued in proportion to your regular income, expenditures, and the monthly EMI being paid. The loan amount is calculated based on the applicant’s income and company category.
Companies listed under the approved category of top Banks are well-performing organizations with increasing turnover. Over the years, leading banks that issue personal loans, such as HDFC Bank and ICICI Bank, have recognised that borrowers employed by stable, profitable companies are less likely to default on their credit payments.
Therefore, to facilitate sourcing banks that process personal loans, they have published an approved list of companies, categorised by their value and performance. Banks vet these companies before they are included in the approved company list for processing personal loans.
The HDFC Bank company category list is extensive, including over 53,000 companies classified as Cat A, Cat B, Cat C, and Cat D. Your company must be on the approved list to qualify for a personal loan from HDFC Bank.
Stability of the job and the Income: Employees of the listed companies approved by the Bank are assured of timely remuneration and secure employment. The salary is credited regularly on the assigned date, reassuring the lender that the EMI due will be repaid smoothly. The listed companies are growing and profitable ventures that offer employees a secure future.
Highly educated and well-qualified staff; top companies attract the best talent from leading educational institutions. Professionals graduating from renowned universities and colleges seek employment at reputable organizations. Banks prefer to extend credit to professionals such as graduates from the Indian Institute of Technology or the Indian Institute of Management, as they earn high incomes and have a promising future.
High income and expenditure: Premier companies listed as Cat A and CAT B, or the Super prime or prime companies of ICICI Bank, offer higher yearly packages to their employees, enabling them to enjoy a better lifestyle. Banks readily extend personal loans to these employees, who have the funds to repay them conveniently, thereby meeting their aspirational needs, such as home renovations and holiday expenses.
Smooth processing and documentation: Employees of top-tier companies can easily provide the KYC and income documentation required to process a personal loan. Salary slips are issued online, and salaries are transferred to the salary account monthly. The applicant can verify employment via an email from the official email ID. These checks help to expedite the process and prove the authenticity of the applicants.
Lower default and risk: Funds as a personal loan are issued by Banks without collateral; therefore, timely repayment of the EMI is of primary concern. Employees of the listed companies have a better on-time payment record for credit dues than employees of open-market companies. The steady credit profile makes them the preferred sourcing segment for personal loans. They are offered speedy processing and favourable terms for their personal loan request.
A lower interest rate: Applicants employed in Categories A and B of the HDFC Bank company category, and as a Super prime company in the company category list of ICICI Bank, are offered the lowest interest rate, starting at 9.99%, on a reducing balance.
Extended tenure: The repayment tenure for a personal loan is from 12 to 60 months. An extended tenure of up to 84 months is offered to employees of listed companies, subject to the approved loan amount.
Increased loan amounts: Employees of the top-tier companies of HDFC Bank and ICICI Bank are issued higher loan amounts. With the increased tenure and a higher eligibility calculation, clients can receive the required loan amounts.
Documentation: The income documentation requirements are more convenient for applicants of the listed companies. A one-month salary slip can suffice if the applicant has recently joined employment with the company.
Preferred processing: With the advent of digitalisation and online processing, applicants from listed companies can apply for a personal loan online. The KYC video verification allows the Bank to disburse funds quickly.
A personal loan has become a popular way for seafarers in India to finance individual and emergency expenses, such as travel, wedding costs, home improvements, and extra funds during emergencies. Merchant navy officers earn a high income and can maintain a good repayment track record.
However, the unusual terms of their employment can create some roadblocks to the smooth processing of a personal loan request. Being aware of these issues may make the personal loan journey easier and help avoid delays.
Seafarers and officers of the merchant navy work on contracts lasting 6 to 8 months. After completing their contracts, which involve sailing for extended periods and infrequent shore visits, they are entitled to a well-deserved break of 3 to 4 months. This break may be misunderstood by lenders, who might assume the applicant will be unemployed during this time and may doubt their ability to meet financial commitments.
The salaries of merchant navy applicants working with a foreign company are credited to the NRI account, allowing funds to be deposited in a foreign currency. The applicant receives remuneration for the duration of the contract. Banks will average the total funds received over a year to determine the monthly income.
Merchant Navy employees receive their salary from the employer in accordance with the terms of the contract. The company can credit the salary monthly or quarterly. Some organisations allow applicants to draw funds as required against the salary credits and settle accounts after the contract ends, and they leave the ship. Systematic salary transfers and receipts may vary according to the terms of the contract.
Unconventional salary credits can leave the bank uncertain, as regular salary transfers to the account are required under personal loan rules.
As part of the personal loan process, banks verify employment and document validity by contacting the company’s HR or administrative officers. If a foreign company employs the applicant without a local office in India, communication may be challenging.
Policy requirements for HDFC Bank include that the applicant has a self-owned residence, as a merchant navy member is away on the high seas for most of the year, and self-owned residence ownership is mandatory.
Documentary proof of self-owned residence is mandatory. The acceptable documents for residence proof are as follows:
To apply for a personal loan from ICICI Bank for employees of the merchant navy, applicants must submit the required documentation. The documentation required is more extensive due to the unusual job profile of a merchant navy applicant.
The extra documents besides the KYC and income documents are:
Personal loans are unsecured; not all Banks and NBFCs will process personal loans for seafarers. HDFC Bank and ICICI Bank are the primary lenders that issue personal loans up to ₹ 40 lakhs to merchant navy officers who meet the salary criteria.
The best time for an applicant to apply for a personal loan is soon after the contract is completed. This is when all required documents are readily available to the applicant, allowing them to complete the formalities before rejoining a ship for the next contract and returning to employment.