Living in a Shared Accommodation? Your Personal Loan Application can be Rejected

28 Mar 2019 // 24 min read // Personal Loans
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The days are gone when youngsters preferred jobs in their city. Girls were never allowed to leave their cities in quest of a job. Nowadays youngsters leave their home town to settle in cities where their job takes them. In this scenario, shared accommodation has become a very common feature. Shared accommodation is economical for youngsters who have just acquired a job. With a lot of scope for better opportunities, job hopping is a common practice in the private sector. Living in a shared accommodation makes it easy for one to shift places as per the job requirement. Though living in a shared accommodation is advantageous, it has its own disadvantage as far as Personal Loan is concerned.

It is easy for youngsters to Avail Personal Loan as there is no need for security and there is no restriction on the end use. Since it is a high-risk loan, banks are very cautious while extending a Personal Loan. Though Personal Loans can be availed at the click of a button on the computer screen, it is not necessarily a cakewalk for all. The risk profile of the applicant is assessed in detail, and every aspect is scrutinised with a lot of care. Since Personal Loans are not backed by loan security, the chances of the file become a non-performing asset is very high.

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The creditworthiness of the applicant is viewed very critically while assessing the eligibility of the applicant. One of the most important documents required for the bank is the address proof of the applicant. The address of the applicant plays a vital loan in assessing the eligibility of the applicant for Personal Loan. If one has acquired a new job and is living in shared accommodation, banks may infer that the rent payable out of the income will leave the applicant with very little funds at disposal to service the EMI of the proposed loan. Such applications will not be considered very easily.

Shared accommodation is a convenient preference for bachelors. But lending institutions who are already skeptical about the spending spree and job skipping practice of bachelors will rate a proposal from a bachelor living in shared accommodation as a very high -risk profile. This is the main reason to turn down the Personal Loan Application of young applicants.

Shared accommodation or paying guest accommodation is considered as a temporary address, and hence lenders will view this from the risk angle while processing the loan application. Personal Loans are already high- risk loans and banks will not make it further risky by lending to persons in shared accommodation. It is a general understanding that a person in paying guest accommodation is prone to shifting address any number of times. If the address is not updated in the records of the bank, then it will become very difficult to recover the dues from such a candidate if the loan goes bad.

On the other hand, if one is married and living in shared accommodation with his or her spouse and having a stable income, it may not be that difficult to obtain a Personal Loan. It cannot be concluded that a person living in shared accommodation may not get a loan at all. If one is in a stable job and has a good credit history, then there are chances that the bank may consider the Personal Loan application. However, the applicant will have to provide a co-applicant who is equally creditworthy.

Banks do try to get additional information about the applicant by other data resources before rejecting the proposal. Social media is one of them. Depending on the kind of posts that are uploaded by the applicant, the blogs he or she reads frequently, lending institutions assess the nature of the applicant, his or her saving and spending habits, etc. They also check the Linkedin profile to verify how frequently one has changed jobs. If they get positive information about the applicant, then they will proceed further.

The main concern of lending institutions is the income stability and the repaying capacity of the borrower. The organisation where the applicant is working and the work experience will be majorly considered. If the applicant has been working in the same organisation for over a year and is earning a handsome salary, then the shared accommodation aspect will be viewed leniently. Credit score of the applicant is also one of the vital angles to consider the proposal.

Even with proven creditworthiness, if one is a new customer and is living in shared accommodation, lending institutions may a doubt the intentions of the applicant about repayment of the loan. If the loan goes bad then tracing the applicant will be difficult if he or she has changed the address.

To mitigate this kind of a risk, providing an irrevocable mandate from the employer that the instalment will be deducted from the salary of the applicant and credited to the loan account has been made mandatory. Also, an undertaking from the employer that the employee will not be relieved either on transfer, resignation or VRS without informing the bank has to be provided. Some organisations who have a tie-up with banks to provide loans to their employees even insist for a No Objection from the bank for any employee who has a salary account with the bank irrespective of whether he has a loan or not. It is to ascertain the loan liability if any, so that the same may be cleared out of the terminal benefits due to the employee. The employee might have availed a loan for which providing the mandate is not compulsory. In such cases, the employer will not have a record of the employee’s commitment. Hence the No Objection from the bank.

The fact that a Personal Loan is difficult to get if living in shared accommodation is true. However, if the bank is convinced with the creditworthiness of the applicant then living in a shared accommodation will not be a reason to reject the Personal Loan application.

Applying for Canara Bank Personal Loan or IndusInd Bank Personal loan is recommended since their loan processing is simple and hassle-free.

Also Read: Common Concerns Regarding Online Personal Loan Applications

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