Personal loans are unsecured loans taken to fund emergency cash requirements. But since they are unsecured, lending agencies prefer to lend them to people with a regular source of income. While salaried individuals are the preferred choice of banks for giving personal loans, self-employed having a stable income can also get instant loans. Let us look at the eligibility requirements for the personal loans for self-employed.
Eligibility Norms for Personal Loans for Self-Employed
Self-employed people can seek personal loans depending on their income levels, credit worthiness, and their repayment capacity. Before you apply for an instant loan, do check the eligibility norms listed by the lender. These relate to:
- The Age-Most banks require the applicants to be above 21 and below 55 years of age.
- Business– Lenders prefer to sanction loans to established businesses- businesses that are at least three years old.
- Income Tax Returns-Applicants must have filed income tax returns for at least the past year.
- Audited Accounts-Banks prefer to lend to businesses whose accounts have been audited by a professional chartered accountant. Audited accounts provide more credibility to the business and assure the lenders about its performance.
- Credit worthiness measured by the credit score– Lenders prefer to lend to applicants having a good credit score. Applicants who have a good track record of repaying their earlier loans or other borrowings on time have a higher chance of getting an instant loan on attractive terms. Individuals with a lower credit score may get a personal loan but at a much higher interest rate.
Keeping these personal loan eligibility norms in mind, a self-employed person should ensure that:
- The accounts are maintained properly and have been audited by a chartered accountant.
- The Income tax returns have been paid.
- The business has been in existence for over three years.
Documents To be Submitted for Instant Loans
Self-employed people applying for instant personal loans will need to submit certain documents along with their applications. These documents include:
- KYC Documents including PAN Card, Aadhar Card, Utility Bills, Voted ID Card showing details like name, age, address, and contact number.
- Documents proving the existence of the business.
- Financial documents including audited accounts of the business.
- Latest IT returns.
- Latest bank account statement.
- Passport Size Photo of the applicant
Tips for Self-Employed Seeking Personal Loans
Self-employed people seeking low- interest personal loans should not only ensure that they meet all the eligibility norms but also provide the correct information and submit the necessary documents. But merely looking for low-interest loans is not enough. They should also check about the other charges like the processing fees associated with a personal loan. They can use tools like an EMI calculator to calculate the EMI for different amounts of loans for varying durations.
Another thing that self-employed people should take care of is working towards and having a good credit score. This is possible by making all the bill and EMI payments on time. Any kind of delay or default in the payment of earlier loans can hurt the credit score. Applicants with a low credit score are not viewed favourably by lenders since the risk of default is high. Another way to ensure that credit score remains high is to avoid multiple applications for personal and loans.
Another way to improve the chances of getting a personal loan is to apply to banks with whom you already have a relationship or have been dealing with.
