While there are multiple ways of earning yourself a living, one of the best, in our opinion, is to become a self-employed professional. Right from freedom of working hours to not being dictated by a boss, there are some unbeatable perks of this form of employment. However, one common struggle a lot of self-employed professionals regularly face is getting approved for a personal loan.
Traditionally most banks and financial institutions shied away from granting loans to self-employed professionals citing the lack of job security, however with the passing days, the lending situation in India has improved many fold, and today, you can easily get approved for a personal loan as a self-employed professional.
Thus, in today’s post, we will share with you a step by step process of applying for a personal loan as a self-employed professional in India, along with sharing some useful tips and tricks which will surely increase your chances of approval.
Without further ado, let’s get started.
How to Apply for a Personal Loan as a Self-Employed Professional?
As I mentioned in the preceding paragraphs, although the situation is now improving, even then, there are only a select few lenders who approve personal loans for the self-employed, and thus naturally, their application process is a little different.
Shared below are the most significant steps of the process.
Go on to your favourite search engine and search for “personal loan for self employed in india.”
Immediately upon hitting enter, you will see a variety of offers from different lenders. Go through each one of them and be especially mindful of the total tenure of the loan, along with the interest being charged.
Once you have chosen a lender who meets your needs, navigate to their official website or download their smartphone application to initiate the application process.
Start by sharing your phone number, email address, and OTP received from the lender. On the next screen, complete your personal information such as your full name, residential and permanent address, PAN card number, Aadhar Card number etc.
On the next screen, share your employment and income information with the lender. On this screen, select your employment type as self-employed, followed by business vintage (that is, the total number of years you have been engaged in this business), and finally, your in hand income every month.
To complete the application process, upload all the requested documents onto the secured server of the lender and submit your application.
After successfully completing the application, the lender will assess your creditworthiness, and if approved, you will have the money in your bank account in under 48 business hours.
Documents Required
In order to get approved for a personal loan as a self-employed individual, there is a list of documents you will need to share, and some of the most significant of them are as follows.
Government issued identification documents such as Aadhar Card and PAN Card.
Permanent and residential address proof
Income certificate, last 6 months bank statements and last 3 years ITR returns.
Eligibility Criteria
In order to get approved for a personal loan as a self-employed professional, you will need to meet the following eligibility criteria.
Have a minimum monthly income of ₹15,000 in hand
Be a permanent resident of India for at least the last 5 years
Have a minimum business vintage of 3 years
Must have last 3 years ITR files present
Must have a credit score of above 750 on a scale of 900
Must be between the ages of 23 and 58 years
Tips to Increase Your Chances of Approval
Getting approved for a personal loan, especially as a self-employed professional, can be challenging at times, and thus shared below are some tips and tricks to increase your chances of approval.
Have a Good Credit History
Irrespective of your type of employment (that is self-employed or salaried), one of the first aspects any lender will check to assess your creditworthiness is your credit score. In India, there are two main credit rating agencies, CIBIL and Experian, and both of them take into account the following four factors to assign you a credit score on a scale of 900.
The total number of loans you have taken in the past
The total amount of credit you have utilized
The total number of timely payments you have made
The total number of late payments you have made
Taking all these factors into account, every borrower (new or seasoned) is assigned a score on a scale of 900, and generally, you need to have a score of 750 to get approved.
Do Not Apply With Multiple Lenders
When you are looking for a personal loan, it is easy to think that applying with multiple lenders at the same time will increase your chances of approval; however, this could not be further from the truth. The on-ground reality is such that every time you apply with a lender for a loan, the lender requests your credit history from the bureau, which is treated as a hard inquiry. While upto 3 hard enquiries a month are tolerated, anything beyond that generally leads to a decrease in your credit score by a few points.
If you are careless, the situation can become worse, and your credit score might get damaged beyond repair. Thus, ensure that you stick to one or at most two lenders at the same time and do not venture beyond that in your desperation.
Apply for a Secured Personal Loan
Last but not least, as a self-employed professional, you always have the option of applying for a secured personal loan. Although this tip might sound detrimental to your progress at first, in reality, applying for a personal loan arrives with several advantages such as faster approval periods, lower interest rates and less impact on credit score. Thus, if you are in urgent need of a personal loan, you can consider applying for a secured one.
Conclusion:
There used to be a time when most financial institutions would straight away deny loan applications from self-employed borrowers. However, as the popularity of personal loans increased, these days, lenders are more willing to give out loans to self-employed individuals, thus increasing your chances of approval manifold.
So go ahead and apply for a personal loan up to 5 lakhs today.
