Obtaining a home loan in India is a challenging task, especially for contractual employees. Unlike salaried individuals, lenders follow stringent eligibility criteria for contract-based employees, owing to an inconsistent employment profile.
Nonetheless, contract-based employees can obtain a home loan online. Let’s find out how.
The Employment Factor
Typically, lenders prefer applicants with a ‘permanent’ job or a work experience of 4-5 years with the same company, to provide a home loan in India. This is because a stable job posits a steady income stream.
Because contractual employees lack a stable income source, paying off the home loan EMIs can become difficult over the tenure. Consequently, the lending risk is high, which deters lenders from accepting the home loan applications of contractual employees.
Nevertheless, several other factors determine the home loan eligibility for a contract-based employee apart from their employment status, such as –
Your age is a significant home loan eligibility criterion. If you are a middle-aged contract-based employee, then you may be assessed negatively. In such a scenario, lenders often question the credibility of your past work experience and give an unfavourable review.
This lowers your chances of securing a home loan approval.
Assessment of Work Experience
This is done to check the continuity of your career as a way to assess the lending risk. Generally, lenders evaluate your work experience of 4-5 years and gauge you on factors like:
- Contract renewal with the same employer
- Stability of your income streams
- The reputation and credibility of your employer(s)
- Past surplus income, profits, and appraisals
In any case, a positive assessment of these factors holds a higher weightage for the approval of a home loan online.
Having a professional qualification is favourable for contractual employees. This is because lenders consider your employability prospects while evaluating your home loan application.
If you have a professional degree, lenders assume that once your contract expires, getting a new job won’t be difficult for you. Moreover, it does not matter if it is your first job ‘on contract’ or not. Consequently, you have higher chances of obtaining a home loan in India.
Frequency of Contract Renewals
On average, a contract expires within 6-12 months. However, if your contract is getting renewed every six months by the employer, it reflects sufficient market demand for your skills. This assures the lenders of your employability prospects and future income.
At the same time, lenders prefer long-term contracts over short-term contracts while assessing a home loan applicant. This is because a longer contract equals higher employability and income stability.
A contract-based employee can secure a home loan in India even if the eligibility criteria are strict. The trick is to find the right lender. As you know, interest rates are usually high for contract-based employees. Therefore, it is wiser to compare lenders to secure the best deal.
To do this, always estimate your EMI amount using a home loan EMI calculator and compare lenders before you apply for home loan.