Personal Loan for Self-Employed: Your Guide to Affordable Financing

Self-employed individuals enjoy flexibility, but accessing credit can be challenging due to variable income. Still, many lenders offer personal loans if you meet eligibility criteria, provide the right financial documents and maintain a strong credit score. This guide helps you explore how to secure affordable financing, even without a salary account.

Can Self-Employed Individuals Get a Personal Loan?

Contrary to the popular belief that a Personal Loan can only be availed by salaried employees, many banks and NBFCs now offer personal loans to self-employed individuals as well. However, the eligibility criteria and required documents may differ from those of salaried employees. Read on to know more!

Eligibility Criteria for a Self-Employed Personal Loan

As stated before, the eligibility criteria for a Personal Loan for the self-employed vary significantly from those of a loan for a salaried individual. Here are a few key aspects to consider:

• Nationality - You must be an Indian citizen.
• Age - Most banks and NBFCs require applicants to be at least 21 years old. 
• Credit Score - A credit score of 650 or higher is indispensable for loan approval.
• Income - The minimum annual household income (as declared) must be ₹3 Lakh.

While the aforementioned are the basic eligibility requirements for a self-employed Personal Loan, some lenders can also assess eligibility based on additional factors. 

Documents Required for a Personal Loan for Self-Employed 

Individuals have to furnish certain specified documents in addition to the application form. While the list of documents required can vary from lender to lender, most banks/NBFCs ask for minimal documentation that includes only the following: 

• KYC Documents: Just like any other loan application, KYC documents such as PAN card, Aadhaar card, Voter ID, Driving License, Passport, etc. are required as identity proof.

Interest Rate and Processing Fee for Self-Employed Personal Loan

A Personal Loan for self-employed professionals is subject to various fees and charges, including the interest rate, processing fee and others. However, compared to traditional instant personal loans, certain lenders may charge slightly higher rates. This is due to the high risk associated with the unsecured nature of the loan. 

• Interest Rates - The rate of interest of a Personal Loan for the self-employed is governed by various factors, including credit score, existing debt, monthly income, etc. However, with a good credit profile, it is possible to secure a Personal loan for the self-employed at competitive interest rates. In general, the rate of interest for a loan for the self-employed starts around 10% p.a. for most lenders.
• Processing Fee - The processing fee (and other applicable taxes) of a loan for self-employed is a one-time fee charged by lenders for processing and handling operations. In general, lenders deduct the processing fee from the final loan amount after loan approval, before disbursal to your bank account.

Tips to Secure Low Interest Rates on a Personal Loan for Self-employed

Follow these few simple tips to qualify for a Personal Loan at the most affordable interest rates:

• Fulfil all eligibility requirements
• Apply with a high credit score
• Maintain a history of timely repayments
• Showcase healthy cash flow
• Apply with a good business vintage

Maximum Loan Amount and Repayment Tenure of a Personal Loan for Self-Employed

The funds available from a self-employed Personal Loan can be as high as ₹5 Lakhs. However, the final approved loan amount depends on a variety of factors, including the following:

• Credit score
• Existing financial obligations
• Repayment history
• Secured/Unsecured Loan

The funds from a Personal Loan for self-employed individuals have unrestricted end-use, meaning that you can use them for both professional and personal expenses. For example, you can use the funds to support your professional growth, including funding business expenses/business expansion, purchasing equipment, and arranging working capital. You can also cover personal financial needs such as medical emergencies or wedding expenses with the funds from a Personal Loan.

However, before you apply online for a Personal Loan for self-employed, having a robust repayment plan should be one of your financial goals. With most lenders offering benefits like flexible repayment options, you can plan your monthly repayments with the help of an EMI calculator for a Personal Loan for the self-employed.

Application Process for a Personal Loan for Self-Employed

In the age of digitalisation, most banks and NBFCs have an online approval process to avail of a Personal Loan for self-employed. This means that there is little to no need for bank visits, and you can receive funds in your bank account within a few hours of approval.

If you are a self employed applying for a Personal Loan, the following points are worth considering before you apply:

• Compare between lenders - Check for existing offers from lenders like banks/NBFCs. Compare the offers from various lenders in terms of low interest rates, processing charges applicable, pre-payment charges, benefits like minimal documentation and flexible repayment options.
• Check CIBIL score - Always check your CIBIL score before applying for a loan for self-employed. While a minimum score of 750 is desirable, applying with a higher score opens the doors to affordable interest rates, higher loan amounts and sometimes elimination of the need to provide security.
• Gather required documents - Once you have chosen a lender, research the documents required to apply for a Personal Loan and gather them for ease of loan application. Prepare digital copies of the documents for uploading during the online loan application process.

To Conclude

Unlike conventional belief, self-employed individuals can also avail of a Personal Loan just like salaried individuals. By fulfilling some basic eligibility requirements and providing the required documents, it is possible to avail of a Personal Loan for self-employed individuals with a maximum loan amount of up to ₹5 Lakhs. 

While the interest rate of a loan for the self-employed may be higher than conventional personal loans in certain cases, you can secure an affordable Personal Loan by applying with a high credit score, showcasing consistent income proof and a minimum business vintage of 2 to 3 years.

FAQs

Are there flexible repayment options available for self-employed individuals seeking a loan?

Yes. Most lenders, including banks and NBFCs, offer flexible repayment tenures for personal loans to self-employed professionals.

How much time does it take for loan approval of the self-employed personal Loan ?

Your application for a Personal Loan is processed swiftly without any delay. To ensure faster loan approval, ensure to fulfil all the eligibility requirements and furnish all the necessary documents at the time of application.

Can I get a Personal Loan for self-employed individuals with a low credit score?

It is extremely unlikely to get approval for a Personal Loan with a low credit score. This is why it is important to apply with a high credit score of at least 650.

Do I have to provide security to avail a Personal Loan for self-employed?

While personal loans are generally unsecured in nature, depending on factors like your credit profile, business vintage, repayment history, etc., certain lenders may require collateral to avail of a Personal Loan for self-employed.

Can I receive funds directly into my bank account with a Personal Loan for the self-employed?

Yes. The final approved loan amount is disbursed directly to your bank account after verification and final approval of your Personal Loan application.

Can I get a Personal Loan if I have my own business?

Yes. Many banks and NBFCs provide personal loans to self-employed professionals, although the eligibility and documents required may vary from conventional loans.

Do I have to visit a bank to apply for a Personal Loan for self-employed?

With most lenders having an online application process, applying for a personal loan can be done online or in person at a bank branch.