Personal Loans can be immensely useful for any purpose including home repairs, paying for medical costs, a wedding, and so on. The eligibility criteria for Personal Loans vary for a salaried individual and a self-employed individual.
This difference exists because salaried individuals are seen as having a regular source of income, which is relatively more stable. In contrast, the income of a self-employed person may vary from month to month, which can make it more difficult for a lender to be sure that the applicant will be able to service the loan.
However, although the criteria may be slightly different, this does not mean that a self-employed individual cannot avail of a personal loan. Here is an indicative list of eligibility criteria for Personal Loan for self-employed individuals used by most lenders.
The criteria are slightly stricter than that for salaried individuals, however, there can be easily met.
If the applicant meets all of the above criteria, they would be eligible for a Personal Loan. The amount of the loan for a self-employed person will depend on the income level of the individual.
The documents required can vary from lender to lender, but usually, they will require the following documents. After reviewing the loan application, a loan executive may ask for further documents as well.
The interest rate at which a Personal Loan can be availed from a lender can vary greatly. This interest rate can be anywhere between 10.99% and 18%. Here are some of the primary factors which affect the interest rate of a Personal Loan for a self-employed person.
The credit score of a self-employed person should be at least 750. The higher it is from 750, the lower the interest rate will be. The credit score is calculated by CIBIL to determine how credit-worthy a person is. CIBIL gives a score to every person with a banking account, and every lender can access this score.
Keeping a high credit score is crucial if a person wants to be part of the formal lending system. It is that crucial. There are several ways in which the credit score can be improved. This includes paying off all your credit card bills on time every month, paying all your EMIs on time, having a long credit history, using multiple credit cards, and never missing a payment.
Lenders need to know how stable your source of income is. If a borrower has a business which is less than six months old or he wants to take a loan to start a business, they may have a hard time getting the loan sanctioned.
However, if a borrower has been in business for more than five years and has a stable income from that business for more than three years (as evidenced by bank financial statements and income tax returns), such a person has a very good chance of availing a Personal Loan at a favourable interest rate.
Essentially, the longer the tenure of your business, the lower the interest rate will be.
If you’re approaching a bank for a loan, and you already have savings account with that bank or you have already availed of a loan from that bank, you may be able to receive a loan for self-employed at a relatively lower interest rate. Banks value past relationships and since they already have professional relations with you, they will be able to trust you more.
Hence, you should always approach your own bank for a loan before approaching other banks or NBFCs.
It goes without saying that if an applicant has a higher income, they can avail of a Personal Loan at a lower interest rate. This is because, with a higher income, it will be easier for the applicant to pay off the loan. Hence, the risk being taken by the bank is lower and they are more confident that the applicant will be able to service the debt.
Usually, a Personal Loan will require a minimum amount of monthly income.
A Personal Loan for self-employed individuals can be used for a host of different purposes. This can include:
Personal Loans for Self-employed come with no usage restrictions and can be availed of for any of the above-mentioned purposes.
Availing of a Personal Loan for self-employed people is not as difficult as people will have you believe. Even though the criteria are slightly stricter than those for a salaried person, if you have a regular source of income, the lender will be able to have adequate comfort in lending.
If you are looking for loans for self-employed but cannot find one, you can consider offering collateral for that loan as well. This may make your interest rate on the loan lower as well.
If you’re a self-employed individual seeking a Personal Loan, head over to Poonawalla Fincorp to explore your eligibility and attractive loan terms.
Transformation and growth are a part of life. As a professional, you have immense growth opportunities, some of which you are unable to pursue due to a lack of funding.
Often people confuse professional loans with business loans, but there is a slight difference. Professional loans are given out to professionals like doctors, chartered accountants, company secretaries, architects, etc.
How magical was the day when you discovered your career path? After a lot of research, putting in so much hard work, late nights, your heart and soul, you have become what you are today.