Personal Loan for Self Employed
Updated on January 7, 2021 | by Alex Smith
When you are a self-employed professional, you are your own boss. Starting from the essential things like setting your own working hours to choosing which clients you collaborate with, you have full control over your professional life and finances as a self-employed professional.
In this day and age, with a global pandemic in full swing and job losses on the rise, more and more people are choosing to go the route of being self-employed rather than being stuck in a 9 to 5. However, just like all other good things in life, being self-employed also comes with some perks and shortcomings.
One of these is the difficulty in securing a personal loan when you need financial assistance. The traditional lending set up in India is organized so that the entry barrier is set too high for those who have chosen to be their own boss. But luckily, the gears are shifting, and things are beginning to change for the better.
These days multiple lenders in India specialize in rendering personal loans to self-employed professionals. Thus in today’s article, we will share a step-by-step process of how you can secure one for yourself.
Let’s get started.
What Is a Personal Loan?
Before we dive into the intricacies of how you can get a personal loan as a self-employed professional in India, let us first better understand the meaning of a personal loan.
A personal loan is a type of loan through which you can borrow a certain amount of money in the range of ₹10,000 to ₹5 lakhs and repay it via a flexible repayment plan. Personal loans are widely different from traditional loans, mainly due to the fact that they have lower rates of interest and also a flexible repayment plan.
How to Get a Personal Loan as a Self-Employed Professional?
Now that you know what a personal loan is, let us explore how you can get one as a self-employed professional.
Step 1: Go Online and Research
The first and most important step in getting a personal loan as a self-employed professional is conducting thorough research. Although it is true that there are now multiple lenders who offer this service, each of them has different terms and conditions, along with eligibility criteria.
Once you search for the keyword “personal loan for self-employed,” you will come across multiple lenders who offer the service. Here you need to visit each of these lenders’ official websites and check all the terms and conditions they have listed for self-employed professionals.
Step 2: Choose a Lender
Once you have conducted your research, the next step is to finalize on a lender of your choice. Depending on the interest rate and the flexible repayment schedule, choose a lender whose offer works best for you. In this step, make sure to note that just having a low rate of interest doesn’t mean that the lender is offering you a good deal because you have to remember that they are also trying to make a profit.
Thus, make sure that you carefully go over all their criteria before deciding on your lender and then finalize on a lender of your choice.
Step 3: Start the Application Process
Once you have decided on a lender of your choice, the next step is to start the application process. In order to do this, you either need to visit the official website of the lender or download their smartphone application. Once you have arrived at their central homepage, initiate the process by sharing your phone number and email address with the lender. The lender will use these details to create an account for you. Once you have shared these details, you will receive an OTP either on your mobile or on your email. Once you have entered the OTP, proceed to the next step.
Step 4: Enter Personal Details
Now, in the next step, you will need to enter the personal details. This includes sharing your full name, current address, residential address, pin code, and referral code. A good point worth noting here is that most lenders offer referral and discount codes, which you can enter in this step. Sharing these will often fetch you a better deal.
Click on next and on the following screen, share your employment type, in this case, self-employed. Enter your monthly salary and choose your category of work.
Step 5: Share Income Details
Being a self-employed professional, there are several documents you will need to share with the lender. Start by sharing your monthly income, followed by the last 6 months of bank statements. Along with this, you will also need to share the last 3 years of your ITR return to prove that you are eligible for the applied loan amount.
Step 6: eKYC
Last but not least, share your PAN Card as well as your Aadhar card number with the lender. The lender will use these details to initiate the eKYC or electronic Know Your Customer process, such that they can access your credit score information. If you are unaware of what your credit score is, it is basically a numerical value that is assigned to you on the basis of your past credit history.
There are two main credit rating agencies in India, CIBIL and Experian. They take into account 4 main factors while assessing your creditworthiness; which are:
- What is the number of loans you’ve taken in the past
- The total amount of credit you have accessed in the past
- The number of timely payments you have made
- Any missed payments in the past
By taking into account all the information, a credit score on a scale of 900 is assigned to you. In the case of self-employed professionals, most lenders request a credit score of above 800, so keep that in mind while applying for your personal loan.
Once all these steps are completed, now it is time to wait as the lender assesses and verifies all the information shared by you. If your loan application is approved, you will receive an intimation both via email and SMS, and you can proceed to apply for the loan.
Once your application is approved, the lender will extend you an offer for a personal loan. This will include the loan amount you have requested, the interest amount due to your loan amount, the EMI amount due every month, and your loan’s total tenure.
In this step, some lenders also provide the option of tuning your EMI amount and the loan tenure to your preference, so keep a lookout for the same.
Being a self-employed professional is a great way to lead your professional life, mainly because you are directly responsible for all your success. And with a personal loan from a trusted lender, the chances of your success as your own boss is only set to increase.