What will you do on needing money for an emergency? You won’t beg and steal. The next best option is to borrow from friends and relatives. Let’s face it, not all relatives and friends are happy to lend. So, why stretch receiving hands? Avail a personal loan instead.
Now the question is, Can self-employed individuals avail a personal loan? Of course, they can. Self-employed borrowers own a business. You might think availing a personal loan might be difficult because you don’t earn a salary. This is just a myth.
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When it comes to sanctioning loans, banks don’t differentiate between salaried and self-employed. All they really care for is the borrower’s ability to repay the loan. Some important things that vary for salaried and
|self employed personal loan|
individuals are documentation and interest rates.
A personal loan is a short-term loan which can be availed to meet financial emergencies. These loans have a short repayment period (tenure). Personal loans are also called emergency loans. These loans can be used for any purpose.
Personal loans are sanctioned without any collateral making them unsecured loans. This is why lenders charge higher interest rates on personal loans.
Lenders offer online personal loans. These are paperless and make the application process less complicated. You can get an online personal loan approved with just a few clicks.
Online personal loans have less human intervention and are quick, effective and simple for both the lender and the borrower. Hence, they are also called ‘instant loans’.
1. No reason loan:
2. High-cost loans:
Personal Loans are high-cost loans. They have high interest rates and short repayment tenures, which mean high EMIs.
3. Easily approved:
These loans are approved easily and often disbursed real quick.
4. No collateral:
Emergency loans are sanctioned without collateral. These are sanctioned based only on your CIBIL/credit score and creditworthiness. An ideal CIBIL score to get a loan would be 750 and above.
5. Defaults and credit score:
Self employed borrowers are the individuals who own the business. They are the sole proprietor of their business. The fact that they are not salaried does not mean that the self-employed cannot avail loans. Just like any other salaried individuals, a self employed can also avail personal loans.
The loan amount granted to a self employed person depends on his or her repayment capacity. Different banks have various terms and conditions to provide these loans to the self employed customer. The only thing that varies for self employed customers is documentation and interest rates. Below listed are some of the reasons for taking a personal loan for self employed individuals:
A personal loan is an unsecured borrowing that can be availed from a bank or other financial institution for personal expenditures. Personal loan can be availed for various purposes. Some of them are listed below:
Personal loan for the self employed can also be availed without any proof of income. The loan can be availed by an individual who fails to submit any proof of income. In such a case the borrower will lend money to the individual by securing the loan through the mortgage of assets.
The individual needs to submit any document that serves as collateral for the loan. A borrower can submit property documents, fixed deposits as well as insurance policy to avail funds instantly through secure personal loan. A borrower can also avail personal loan at a lower interest rate by maintaining good relations with the lender.
Personal loans come at higher interest rates and lower loan amounts as these are unsecured. Interest rates on unsecured loans can be negotiated based on the loan amount, employment status, and annual income and so on. It ranges from 13% to 24% a year.
SEE ALSO: Unsecured Loan
The loan tenure for personal loans is 1-5 years.
Purpose of loan:
Each lender has its own eligibility criteria as to the minimum income, number of years in business, age limit, documents and so on to qualify for a personal loan. However, the most common eligibility criteria for availing a personal loan are:
1. Visit the lender bank or the NBFC’s website.
2. Select ‘apply for online personal loan’.
3. Fill out the loan application form.
4. Submit the duly filled form along with the required documents.
5. You’ll be informed on your eligibility for the loan instantly or in a short time.
6. If door-step service is available, one of the relationship managers of the bank will get in touch with you. They will fix an appointment to visit your premises to collect the requisite documents. Some banks may also offer a facility to upload your documents online.
7. The lender reviews the personal loan application form.
8. If the lender is satisfied, your loan will be approved. The funds will be deposited in the same bank account for which you give the statements.
If your loan gets rejected, it may be because of:
Nowadays, many banks and non banking financial institutions provide flexible personal loans to self-employed individuals. But before availing these types of loans, you must know the difference between the two lending institutes. Banks and NBFCs are both financial institutes with loan providing capacity. However, banks have very strict rules and regulations that one must abide. There are different parameters on which banks rank their borrowers before lending money - the interest rates levied and the disbursal of the loans by the banks depends on the CIBIL score of the borrower. On the other hand, NBFCs are more lenient with the terms and conditions in providing the personal loan. But compared to banks, the NBFCs charge a higher rate of interest on the amount borrowed.
There are various factors on which the rate of interest of personal loans depends. Listed below are a few:
You can opt to apply for the personal loan through online as well as offline methods. The different processes through which you can fill the application for personal loan are:
Below listed are the documents needed to apply for the loan:
For offline process, Personal Loan approval usually takes 72 hours and disbursal time taken is 5 working days subject to documents and other verification. But, if you are going with the Online Personal Loan, the application approval may take 1 to 2 hours and disbursal is done within 2 working days.
To avail personal loan, you do not need to provide any collateral or security. However, if you are availing the loan without an income proof, then you need to provide some documents/assets as collateral to avail the loan.
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