Personal Loan

Self-employed People: No Hassle for a Personal Loan

Personal Loan

Thanks to digitalization, now a loan can be applied and availed with just a few clicks on the mouse. Whether it is a personal loan, business loan, home loan, loan against property or a car loan – everything is possible digitally. Happy to read this. This is the one side of the coin. But on another side, still there is 70% loan rejection rate. And most of the loan rejections are in the case of self-employed people.  Why it is so. How we can sort this.

The answer is lenders find it difficult to examine the risk factor for self employed professionals. And, this is the reason why most of the self-employed people don’t receive credit. In this blog, we will tell you how a self-employed professional can avail a loan easily.

Let’s start our discussion with categorization of self-employed group. There are two groups of people who come under this category. First one is those who own a practice like Doctors, Engineers, Lawyers, Interior Designers etc. The second one is those who own a business. They may have their own trading or manufacturing business. Whether it is a business or a practice, the self-employed person needs to establish its identity and existence for at least 2-3 years.

Add to this the most important is that those who want to avail a personal loan must be able to justify his/her income with no difficulty. Self-employed people need to keep the records – profit & loss account & balance sheets to provide income proof to the lender. They should be in the age group of 21 to 65 years and have a certain monthly income.

To add to this, let us have a glance on the important eligibility parameters for a personal loan –

How much credit score is required to avail a personal loan?

We would like to illustrate the credit score parameter with the help of a chart.

Credit Score Range Grade
0 to 1 No credit history
300-550 Bad
551-649 Poor  
650-699 Fair
700-749 Good
750+ Excellent

As evident from the table, you need to have or maintain credit score of 650+

Parameters Eligibility Criteria
Minimum Turn-over Yearly ₹ 15 lakh for self-employed professionals ₹ 40 lakh for self-employed non professionals
Credit Score 650+
Bank Statement Bank statement for the last 6 months
Age Group 21 to 65 years
Minimum Income Yearly ₹ 5 lakh
Minimum Profit ₹ 2 lakh after tax

Major banks interest rates for Self-employed people

ICICI Bank Personal Loan 11.25% 0.99%-2.25%
Bajaj Finserv 11.99% 1.50% – 3%
HDFC Bank Personal Loan 10.75% Rs 1,999 – 2.5%
SBI Personal Loan 12.50% 2% -3%
Citi Bank 10.99% Up to 0.5%
IDFC Bank 11.50% 1 – 1.5%
Tata Capital 11.75% Up to 2.5%, flat fee of Rs 1499
Kotak Bank 10.50% Up to 2.5%
Fullerton India 13.99% Starting from 2%
IIFL 12.99% 1%-2%
RBL Bank   13.99% Upto 2%
Union Bank of India 12.70% 0.5%, Minimum Rs 500
Yes Bank 10.99% 0.99% to 2%
Andhra Bank 11.55% Depend on case to case basis
Syndicate Bank 13.40% 0.5%, Minimum Rs 500
Maharashtra Bank 15.10% 1%, Minimum Rs 1000
Corporation Bank 12.95% 1.5%, Minimum Rs 500
Allahabad Bank 13.15% 1.06%, Minimum Rs 1068
IDBI Bank 13.20% 1%
Karur Vysya Bank 13.90% 0.40%

A good number of self-employed people do not whether they are paying the correct EMI or not. So, its always better to have few clicks on the EMI Calculator. Let us cite some example –

Case 1 – Ravi Kumar is a C.A by profession in Delhi. For his sister’s wedding, he has taken a loan of Rs 700000 at the interest rate of 14% for a tenure of 4 years. He has taken a loan from a leading bank in NCR.

His EMI will be 19,128

Case 2 – Babita Kumari aspires for renovating her spa. After all financial arrangements, she was feeling short of Rs 7 lakh. She took the same as a loan from an NBFC at the interest rate of 14% for a tenure of 5 years. As the tenure is more as compared with Ravi Kumar (cited above), her EMI will be different.

Her EMI will be 16,287

What all documents are required for self-employed people?

Lenders are very concerned about the documentation part for self-employed Personal Loan group people. An applicant applying as a self-employed professional need to furnish the following documents –

  • Duly signed in application form
  • 2 recent size passport photographs
  • Pan card copy
  • Identity proof documents like Driving License/Voter ID Card/Passport
  • Address proof documents like   rent agreement & utility bills
  • Income proof like ITR of last 2 and 3 years
  • Business existence proof like service tax registration/VAT/business address proof/incorporation details
  • GST registration number and VAT returns

Frequently Asked Questions on Self-employed people going for a Personal Loan

1. Do a self-employed people need to have the collateral for availing a personal loan?

A personal loan is an unsecured loan. So, an applicant doesn’t need to have any collateral or security to avail this loan.

2.  What is the personal loan interest rate for a self-employed professional?

The same is stated above. At fin tech platforms, you can easily compare and choose from the best available options.

3. Can a personal loan be transferred?

Yes, personal loan balance transfer is possible. And it is recommended to save on your EMI.

4. What if a self-employed person wants to preclose his loan?

Whether a loan borrower is a salaried or self-employed person – preclosing a personal loan may be beneficial for him. Some lenders allow preclosure after one month, some have defined a period for this. Prepayment charges need to borne by the loan borrower.

5. Does CIBIL Score impact the loan approval process?

Yes, it impacts. Above 700+ Score makes a winning personal loan application.

6. What is the tenure for personal loan?

A personal loan can be taken from a period of 12 months to 60 months.

Other alternative products for self employed professionals are mentioned below –

1. Gold loan

2. Loan against property

3. Property loan

4. Loan against fixed deposits

5. Loan against LIC policy

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