Why Banks Offer Higher Loan Amount to Self-employed Individuals Than the Salaried Ones
Today Personal Loans are a financial tool which is extremely easy to avail for multiple purposes. With flexible repayment models, low-interest rates, banks today have many attractive options for those looking for a Personal Loan. However, if you are self-employed chances are you might be apprehensive when it comes to a Personal Loan. You may be under the fear that Personal Loans are not given to self-employed individuals. Or you may think that the loan amount given is less than that of a salaried person.
Well, we are here to put that worry to rest as we list down the top banks such as ICICI, SBI, Axis, HDFC and Tata Capital which provide some of the best Personal Loan options for self-employed in the market.
Who is a self-employed individual?
Anyone who is running a business of their own or is a sole or joint owner of a business is considered self-employed. They do not have a fixed monthly income, but they get a percentage from their business called turnover. It is a myth that Personal Loan for self-employed is impossible especially these days. It works the other way around. Self-employed individuals have a higher chance of getting a loan than salaried individuals. Self-employed professionals also include doctors, lawyers, chartered accountant, interior decorators, dentists and architects who have their practice.
Why do self-employed individuals get a higher loan?
Although self-employed individuals do not have a fixed income, usually they will be getting a higher income than salaried individuals. This is because they own the business by themselves. This means that if they fulfil all the bank criteria and have a good credit score, they have a higher chance of getting a Personal Loan of a higher loan amount.
Many banks offer higher loans for self-employed individuals such as ICICI Bank, HDFC Bank, Citibank and Tata Capital. Tata Capital Personal Loan is one of the most preferred Personal Loans in the market because they have a hassle-free process to loan disbursal.
Apart from this, Tata Capital Personal Loan has tenure of up to 72 months, one of the longest in the market. In addition, the loan amount for self-employed individuals can go up to Rs. 25 Lakhs without collateral. The interest rates for this loan starts at 11.49%. The Tata Capital Personal Loan also has one of the lowest income features which means that someone who earns Rs. 20,000 per month can also apply for the loan.
ICICI Bank Personal Loan offers many benefits including loan disbursal right into the bank account once the loan is approved. The tenure for the loan is upto 60 months and the highest loan amount offered is Rs. 20 Lakhs. The interest rate varies from 11.25%- 22% per annum depending on the loan amount and repayment period.
Citibank Personal Loan is available for both salaried and self-employed individuals up to an amount of Rs. 30 Lakhs. The interest rate for this loan ranges between 16-18.99% (for self-employed) and the funds will be directly transferred into your bank account. Citibank also provides an online application process for a Personal Loan. If self-employed individuals can showcase Rs. 5 Lakhs annual gross receipts in addition to personal bank statements, and other documents the loan can be availed.
Yes, the bank also offers loans at an interest rate ranging from 11.49% for a period of upto 60 months. Also, you can avail an amount of upto 40 lakhs depending on various eligibility criteria.
As a self-employed individual one of the most important things to keep handy and organised is all your bank statements and financial transactions for the past 3-5 years. This applies for the business you are running as well such as financial statements and IT returns for the company and personal. This is an important piece of document that is considered by all banks when it comes to applying for a Personal Loan. For instance, if you are applying for a Tata Capital Personal Loan, you need to keep your bank statements ready along with your application form even before applying for the loan. Keeping these documents safely along with an identity card, address proof, will put you on a fast track for a Personal Loan for self-employed.
A credit score is an important criterion to consider while applying for a loan. Many banks such as Tata Capital, ICICI, HDFC consider the credit score before sanctioning the Personal Loan. A healthy credit score range between 700-900, and if you have a good credit score, the chances of you getting a loan hassle-free are much higher. A credit or a CIBIL score depends on your income, your repayment capacity, another loan you may have and any default on payments. Tata Capital Personal Loan is given to anyone between the age group of 21-58 years at the time of application of the loan. This means that if you have a good credit score and in the above age bracket you can easily avail a loan.
In this article, we have tried to establish how it can be easy to avail a Personal Loan for a self-employed individual. Bear in mind that Personal Loans by different banks offer different offers on tenure, loan amount, interest rate, prepayment charges. It is important to check all the required criteria and documents before applying for one.