Why Do Self-Employed Individuals Opt for a Personal Loan

Personal loans are one of the most popular loan options in India today. The main reason for this being the ease of availability and competitive interest rates. Usually, personal loans are sanctioned to salaried and self-employed individuals. That being said, the interest rate and documentation process is different for personal loans extended to self-employed individuals. Self-employed individuals are opting for personal loans for emergency financial needs of their business, home renovation, vacation, etc.

There are a lot of reasons why self-employed individuals prefer personal loans over any other type of loan. Some of the reasons are:

●        Easy application process

The best part about applying for a personal loan is that you can do so from the comfort of your house. The convenience aspect is what attracts self-employed individuals. If you are a self-employed person, you know how difficult it is to run a business. You have to be present at the office during the working hours. Therefore, it might be difficult for you to visit the lender’s office physically to get a personal loan. Right from the application to receiving the funds in your bank account, the entire process is seamless and hassle-free.

●        High loan amount

A salaried individual has a steady income source, whereas a self-employed individual does not have this security blanket. Some months the business might make good profit and some months, there might be a slump. In situations like this, a personal loan will come in handy for self-employed individuals and will alleviate their financial burden. You can find out the maximum loan amount that you can borrow by using the personal loan EMI calculator online.

●        Minimal documentation

You do not need to carry multiple documents to the lender’s office anymore. All you need to do is submit the scanned copy of the identity proof, address proof, identity proof and business proof document. After you have submitted the document, the lender will assess your eligibility for a personal loan.

●        Flexible repayment tenure

With a personal loan, you can choose a repayment tenure that suits your income flow. The term for personal loans usually range from 12 months to 60 months.Consider your ratio of debt-to-income before you choose a tenure.

●        Quick loan disbursal

After the loan provider approves your personal loan application, the funds will be disbursed within 2 hours to your bank account. In most cases, you can get funds on the application date if you fulfil the eligibility criteria and the documents submitted are right.

●        Debt Consolidation

Consolidation of debt is one of the most popular reasons for why self-employed individuals take out personal loans. You can combine all your liabilities into a single instalment when you apply for a loan and use this to pay off the other loans that are due. This debt categorisation makes it easier to figure out a time frame that is realistic for paying the debt.

●        Business needs

Personal loans for self-employed individuals are considered to be an excellent alternative to business loans. The eligibility criteria, documentation and terms of business loans are stringent. Self-employed individuals cannot easily qualify for it. Personal loans for self-employed individuals are available to everyone with flexible terms and conditions, These are more suitable for small and medium business organisations.

Personal Loan Eligibility Criteria for Self-Employed Individuals

The eligibility criteria for self-employed individuals is slightly different than that of salaried individuals. They are:

●        The applicant has to be at least 22 years old

●        The applicant must have a CIBIL score of at least 750

●        The applicant should have a minimum annual income of ₹15 Lakhs

●        The applicant should have a minimum work experience of 2 years

The loan amount depends on the income level of the self-employed applicant.

Personal Loan Documents Required for Self-Employed Individuals

The documents required for personal loans for self-employed individuals vary from lender to lender but there are some mandatory documents that have to be submitted. They are:

●        Personal loan application form

●        Two passport size photographs

●        Identity proof - PAN card, Aadhar, Voter ID card

●        Address proof - Ration card, Utility bill

●        Business proof - Certificate of registration, Certificate of Incorporation

●        Income proof - ITR returns, Profit and loss statement