Personal loans take care of emergency monetary requirements and help meet numerous financial needs. These are unsecured loans, which mean no collateral is required for getting these one sanctioned. However, it accompanies a higher risk for the lender because they are mostly offered to salaried professionals with a stable income source.
Nonetheless, some financial institutions provide a personal loan for self employed individuals too. To qualify for it, such individuals must show a steady income stream through their ventures. In addition to that, there are some basic requirements which should be known before opting for a personal loan.
Why opt for a personal loan?
A personal loan demands simple documentation and is collateral-free in nature. Above all, there is no end use-restriction, which helps borrowers meet multiple purposes. These include cost management of a medical emergency, planning a wedding or a vacation, to meet home renovation expenses, etc.
What is the interest rate applicable on a personal loan?
The interest rates on a personal loan for self-employed vary from one lender to another. One must understand their requirements and then take a final decision after comparing the rates offered by different lenders.
During the loan sanctioning process, lenders examine the credit score of the borrower. If an individual is found to be a regular defaulter, the applicable interest rate will go high. On the other hand, lenders might offer a lower interest rate to individuals with a good credit score.
How to repay a personal loan?
Repaying in equated monthly instalments (EMIs) is the usual path to repay a personal loan. An EMI is calculated by combining the principal amount and the interest on the personal loan, divided over the selected tenor.
To make the computation process simple and error-free, one can use a personal loan EMI calculator. It will help determine a repayment tenor that ensures the borrower does not get burdened by repayment and helps plan the finances around the EMI amount.
How much amount should one borrow?
It is tempting to opt for a bigger loan than what one needs. But it is usually advised to borrow a loan according to one's requirements. This way, the borrower can manage the repayment conveniently.
In case, entrepreneurs plan to avail a credit to meet a specific business requirement requiring large funds, they may consider an alternative financing option like business finance. Nevertheless, before applying for any such loan options, individuals must check out the lenders' requirements.
Eligibility criteria for self-employed individuals
Ideally, individuals with a high credit score, a stable job and a regular income source are deemed eligible for a personal loan.
On the other hand, business loan eligibility criteria include -
Applicants must be in between 25 years to 65 years of age.
Business must be established for a minimum of 3 years.
Business IT returns must be filed for at least the previous year.
A chartered accountant must audit business turnover for the past one year.
List of documents required
The documents required for business loans are quite similar to the ones required to apply for personal credit.
For example, individuals need to submit documents like -
Proof of identity and address
Bank account statement of last month
Passport size photo
Self-employed applicants of business credit are also required to submit proof of their business vintage. Before one proceeds to apply for a business loan, he/she must check out other accompanying features.
Simple application process
Top lenders offer a hassle-free online application process that easily allows the self-employed individuals to apply for a personal or business finance. Ideally, to apply for a loan one needs to follow these steps –
Step 1 - Check the eligibility criteria.
Step 2 - Apply for the loan option through the lender's website by filling up the online application form.
Step 3 – Provide the required details and submit the form online.
Also, most leading financial institutions like Bajaj Finserv offer personalised offers to make the entire process worthwhile.
They provide pre-approved offers to customers which help in simplifying and accelerating the lending process. These offers are provided on various financial products like business loans and personal loans. You can check your pre-approved offer by providing a few details such as your name and contact number.
Thus, it is advised that the borrowers check these deals beforehand to apply for a business loan or a personal credit so that they can apply instantly as per their needs and repayment capacity.
Hence, a self-employed professional can be adept at managing the working capital and business finance simultaneously but still feel the need to acquire funding to achieve targets. A high-value business loan can be ideal for such requirements. However, to decide which option is more suitable one needs to be thorough in terms of comparing the associated features and benefits.