Personal Loan for Self Employed

A personal loan is an unsecured loan that is offered not only to salaried professionals but also to self- employed individuals. A personal loan for self-employed is ideal to meet both personal as well as business needs including purchasing new equipment/machinery, home renovation, paying medical bills, going on a vacation, getting married, etc. A self-employed individual can easily apply for a personal loan online and can repay it as per his convenience.

Features and Benefits of Personal Loan for Self-Employed

• Easy application process: A self- employed individual can apply for a personal loan online either on the lender’s official website or on financial platforms like Paisabazaar. The application process is easy to understand and can be completed from the comfort of your home or office
• Loan amount: Starting from as low as Rs. 50,000, personal loan for self- employed goes upto Rs. 40 lakh and can help an individual to deal with various financial situations
• Minimum documents: A self- employed individual can avail a personal loan online just by uploading a few basic documents including ID, Address and Income Proof. This saves you from the inconvenience of carrying piles of documents to the bank
• Flexible tenure: All the personal loan lenders allow the self- employed individuals to choose the tenure of their loan as per their repayment ability. The tenure usually ranges from 12 to 60 months
• Quick disbursal: Once a personal loan for self- employed is approved, it gets disbursed to your bank account within 3 to 5 working days

Personal Loan for Self Employed Interest Rates

Starting from minimum 10.50%, personal loan interest rates for self- employed may vary from individual to individual depending upon his credit score, loan amount, age, repayment ability, etc. Some of the banks offering low interest rate on personal loan for self- employed are:

Eligibility Criteria

• You should be a self- employed individual
• You should be at least 21 years old
• Your annual income should match the eligibility criteria set by the bank
• Your business should be running for at least 2 years

Documents Required for Loan application

• ID Proof: Aadhaar Card, PAN Card, Voter ID Card, Driving License, Passport, etc.
• Address Proof: Ration Card, Utility Bills (Electricity Bill, Phone Bill, etc.), PAN Card, Aadhaar Card, Voter ID Card, etc.
• Business Proof: Proof of Business Existence, Certificate of Incorporation, Certificate of Registration with Appropriate Registration Body
• Income Proof: ITR of Past 2 years, Certified Profit and Loss Statement

Personal Loan for Self Employed with:

• Low Credit Score

Your credit score is one of the first things that a prospective lender checks when an individual applies for a new loan. This is true for not only self-employed applicants but also for salaried individuals who apply for a personal loan. Typically, a low credit score makes it harder for a self-employed individual to be approved for a personal loan. What’s more, if the personal loan application of a self-employed individual with a low credit score is approved, such offers often feature a higher interest rate than in case of individuals with higher credit scores. As a result, it is advisable that self-employed applicants check their credit score before and take steps to maintain a high credit score in order to get the best personal loan offers.

• No Income Proof

Repayment capacity is considered as one of the key factors (in addition to credit score) that a lender considers when evaluating a personal loan application. In order to determine the repayment capability of an applicant, the lender considers both the income of the applicant as well as his/her existing debt. While salaried applicants can easily provide salary slip or salary certificate along with Form 16 as income proof, self-employed individuals do not have these option. Also income proof documents are mandatory in case of an unsecured loan such as a personal loan. As a result, it is not possible for a self-employed individual to get a personal loan without income proof or related financial documents. Key examples of such documents include P&L statement, acknowledged Income Tax returns, certified Balance Sheet, etc. for the past 2 to 5 years. 

Personal Loan for Self Employed EMI Calculator

Paisabazaar’s Personal Loan EMI calculator is an online feature that is easy to access and lets you calculate the EMIs you would be paying even before you apply for the loan. The EMI calculator helps all the self- employed individuals to analyse EMIs and other expenses so that they don’t buy more than they can repay. To use the EMI calculator all you need to do is to fill the desired:

• Loan amount
• Tenure
• Interest rate

The following table will give you an idea about how the EMI Calculator works:

How to Apply for Personal Loan for Self-Employed Individuals?

A self- employed individual can easily apply for a personal loan at Paisabazaar by following the below mentioned steps:

• Click here and fill a form to know the available personal loan offers
• As per the chances of approval, you will be redirected to possible options of personal loan from various lenders
• Either select a lender or call Paisabazaar for assistance
• Complete your application online and submit it

Factors Affecting Self Employed Personal Loan Interest Rates

• Credit score: Before approving a personal loan, banks check an individual’s credit score, which is a reflection of his repayment history. Therefore, a good credit score indicates that you have been disciplined with your repayments and the lenders do not hesitate to offer you a lower interest rate
• Income: Higher your income, higher would be the chances of getting a personal loan at low interest rates. This is because higher income indicates that you would be able to repay the loan smoothly without any delay
• Tenure of business: If your business is running in profit for at least 2 years, you get a personal loan on low interest rate due stability in business
• Relationship with the bank: If you already have a current or savings account with the bank or you have an existing loan that you have been repaying regularly, you may get a personal loan with lower interest rate

Important Aspects

The important things a self-employed applicant needs to consider before applying for a personal loan include:

• Credit score: All the lenders consider your credit score before sanctioning a personal loan. Therefore, a low credit score might be the reason for your personal loan being rejected or being approved for a personal loan with a high interest rate. Hence, if you are planning to avail a personal loan, make sure that you have a good credit score
• Compare before you buy: Personal loan offers from different lenders may feature various interest rates and it is not feasible to go to different websites to check their interest rates. The easiest way is to check personal loan interest rates of all the lenders on Paisabazaar, compare them and then choose the lender offering the lowest interest rate
• Assess complete cost of the loan: Various fees and charges including processing fee, foreclosure charges, late payment fee, etc. are associated with a personal loan. Therefore, before applying for a personal loan, consider the total cost of repaying the loan
• Repayment ability: Before choosing a particular loan amount, it is necessary to analyze if you will be able to manage your monthly expenses after paying the EMI dues. If not, it is a good idea to borrow less as per your repayment ability

FAQs

Q1. Can a self-employed individual get a personal loan if his credit score is low?

Yes you may be eligible for a personal loan, even if your credit score is low. While most banks and NBFCs consider an individual’s credit score before sanctioning an unsecured personal loan, you may still be approved for the borrowing. However, in most cases, you will be charged a higher interest rate on such loans. You should however keep in mind that credit score is only one of the factors that impact the chances of being approved for a personal loan.

Q2. Can a self- employed individual get a personal loan with no income proof or no financial documents?

No. Your income proof and related financial documents are required for prospective lenders to determine your repayment capacity. If you don’t have these documents, the lender won’t be able to analyze your financial stability and hence won’t be sure if you can repay the loan on time. Therefore, income proof documents like ITR or bank account statements are necessary for self-employed individuals to avail a personal loan.

Q3. I have never filed Income Tax Return. Can I apply for a personal loan?

ITR works as an income proof for a self-employed individual as such individuals cannot provide documents such as salary slips or Form 16 that are available with salaried applicants. Thus, if you have not filed ITR, you might not be eligible for a personal loan from a leading bank. However, you can try contacting a NBFC that might offer you a loan without asking for income proof.

Q4. I was working with a MNC 8 months ago and have just started my own business. Can I avail an instant personal loan for self- employed?

Most lenders prefer giving a personal loan to self-employed individuals who have businesses running in profit from at least 2 years. However, a few NBFCs may offer personal loan even if your business is completely new. It is recommended that you check your chances of personal loan eligibility online on Paisabazaar in order to know the best options available to you.

Q5. What happens if I miss an EMI?

If you miss an EMI, you would not only have to pay a late payment fee but your credit score might also decrease.

Q6. Is it possible to prepay/foreclose my personal loan?

Yes, you can prepay/foreclose your personal loan along with foreclosure charges that may vary from lender to lender. Most banks have a lock- in period of 6- 12 months which means that you can foreclose the loan only after paying 6-12 regular EMIs.

Q7. Do I have to pay a processing fee to process my loan application?

Yes, all lenders ask for processing fees that usually start from 1% of the loan amount plus GST. This processing fee is non-refundable and usually varies from one lender to another.

Q8. How can I apply for a personal loan for self- employed offline?

To apply for a personal loan for self- employed offline, you can visit the nearest branch of your chosen lender, leave an online query with their loan department or call up the prospective lender’s customer care department.

Q9. Can I use a personal loan for self-employed for use in business purposes?

Yes, most banks allow you to use a personal loan for both personal as well as business purposes. There is currently no restriction on the end-use of a personal loan for self- employed, hence you can fund various expenses including home renovation, purchasing equipment/gadgets, vacation, wedding, etc.

Q10. When will my loan get disbursed?

Once your loan application is approved, the amount gets disbursed to your account within 3 to 5 working days. However, a shorter or longer time period from approval to disbursal may be applicable depending on key factors such as loan amount sanctioned, individual applicant profile, etc.