Banks and NBFCs offer personal loans to both self-employed professionals, such as CS, CA, engineers, doctors, etc., and self-employed non-professionals such as commission agents, contractors, etc, to finance their personal needs. Lenders usually check for credit score, income, stability of business, repayment capacity, age, etc, and other eligibility criteria before approving a personal loan. Here’s the detailed overview of what banks look for before approving a personal loan for self-employed individuals:-
Credit Score
A credit score is an important parameter considered by most lenders to check the creditworthiness of an applicant. Usually, a credit score of 750+ is preferred by most banks and NBFCs for personal loan applications. Those having higher credit scores are considered financially disciplined and have lower chances of EMI defaults. This reduces the lending risk for lenders and increases the chances of availing personal loans at lower interest rates.
Income
Personal loan lenders usually set an income of Rs 3-5 lakh p.a. for self-employed applicants. Some banks/NBFCs may set a higher minimum income limit for higher personal loan amounts. For instance, IndusInd Bank has set a minimum net annual income after-tax deduction is Rs 4.8 lakh. ICICI Bank has set a minimum net income of Rs 2 lakh for self-employed individuals and Rs 1 lakh for non-professionals. Further, professionals applying for ICICI Bank Personal Loans should have a minimum turnover of Rs 15 lakh and Rs 40 lakh is set for non-professionals.
Age Criteria
Lenders also consider age criteria before approving a personal loan application. For instance, Bank of Baroda requires self-employed individuals to be between 21 to 65 years of age and for IndusInd Bank Personal Loans, the age criteria is 25 to 65 years.
Qualification Experience/Business Vintage & Stability
Banks and NBFCs usually require 3 years of business continuity for self-employed non-professionals and 3 years of qualification experience for self-employed professionals. If your business has been running at a profit for a minimum of 2 to 3 years, you may get a personal loan at a lower interest rate due to business stability.
Identity & Business Proof
As personal loan documents may vary, the following are general documents required by most lenders to assess the income, business proof from self-employed professionals and non-professionals:-
- Identity Proof: Voter ID Card, Aadhaar Card, Driving License, PAN Card, Passport, etc.
- Business Proof: Certificate of Incorporation, Memorandum of Association, Proof of Business Existence, Registration Certificate
- Income tax returns: Banks and NBFCs usually ask for ITRs of the last 2 years or GST returns
- Bank statements
- For self-employed professionals: Primary Savings Account statement for the last 3 months and Practice Current Account for the last 6 months
- For self-employed non-professionals: Business Current Account statement for the last 6 months and Primary Savings Account for the last 3 months
- Business financial statements: Lenders may also ask for the following documents to assess the income and business stability:-
- Audited Profit & Loss Account
- Audited Balance Sheet
- Audited Cash Flow Statement
