Self-employment makes you master of your own world. However, it has its share of challenges too. A personal loan can come to your rescue when you are in immediate need of cash. All major lending platforms facilitate a Personal Loan for Self Employed, to help you live an independent lifestyle and to get going your gig without financial obstacles.
Here is your Guide!
What is a Personal Loan?
The personal loan is money borrowed from a financing institution that you pay back in fixed monthly payments, typically over 6 months to 3 years. The interest rates on a Personal loan can range from 12% to 36% APR. It is an “unsecured” type of financing – not backed by any asset as a security or collateral. The major advantage of personal loan is that you can utilize this money for any reason such as a wedding, business funding, home appliance purchase, home renovation, education, debt consolidation and vehicle purchase.
Things to Keep in Mind While Applying for a Personal Loan:
The Credit Score:
The Lending platforms make their decisions based on certain credit risk factors including your credit score, debt to income ration and financial background. You must have a good credit score, above 750, to qualify for funding. Not surprisingly, consumers with excellent credit report receive the minimum rates on personal loan. You can also apply for a secured loan by offering collateral or co-signer loans to get better rates.
Income Tax Return:
It is important to file ITR in your own name for the income you make from your business. As a self-employed professional you must not take the income tax process for granted. File proper papers and follow due process of ITR. Banks and NBFCs and NBFC-P2P lending platforms are generally quite strict in requiring ITR of past 1-3 years of self-employed people applying for a personal loan.
Most banks and NBFCs put a lot of emphasis on the revenue that is generated by your business. Revenue or sales in some terms is the money you make by selling the products/services of your business. This is just the gross income you make and does not account for the costs you incur on business. Most banks look for revenue in the vicinity of Rs.50 lakhs per year while extending loans to self-employed professionals but some NBFC’s are willing to consider businesses generating Rs.12-15 lakhs also.
Profits / Income:
Your profits and Income from the business is the most critical factor to gauge your repayment capacity. Just like in the case of salaried employees, the monthly disposable wage (salary minus the existing overheads) shows your ability to pay back the debt. The prime factor for self-employed professionals is the income or profits they make from the business. Some financial institutions are strict in mandating Rs.5 lakh as your net income while some Peer to Peer Lending platforms are lenient in allowing even Rs.2 lakhs as the net income.
Last but not the least, you must compare interest rates on Instant Loan in India from multiple lending platforms before choosing. To know your loan EMIs you can use EMI Calculator for Personal Loan. Go for the Personal loan with the lowest APR. It will be the least expensive.
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