In everyday life, self-employed people have to go through several financial challenges. Whether it’s about pursuing higher education, unexpected expenses, medical bills, addressing personal requirements, or expanding business, it often requires additional funds. In such conditions, personal loans serve as a financial tool that helps in fulfilling immediate needs.
In the digital era, banks and financial firms offer online personal loan for ease and convenience. In the article, we will go through the eligibility criteria and the loan options a self-employed may have with different personal loan rates.
What is a Personal Loan?
Banks and financial firms provide a personal loan on the consideration of an individual’s income, profession, employment history, creditworthiness, credit history, repayment capacity, and identity proof to fulfill the requirement of an individual. Personal loans can be taken for multiple purposes, such as from home loans to immediate needs, from education fees to hospitalization bills, and so on.
The process of getting personal loans is easier and follows an online application with document verification. After confirmation of validity and authenticity, the bank offers a lump sum amount with fixed interest rates and time duration. It generates an EMI to repay consistently with no stress on the pocket.
Benefits of Personal Loans for Self-Employed Individuals
A self-employed individual can apply for a personal loan digitally. Online personal loan holds several benefits, including
- Financial institutions offer a fast funding process
- Personal loans have lower interest rates than credit card
- It helps to build a good credit score
- Banks offer online personal loans for flexible use
- Loan holders get predictable repayment schedules
- Banks offer higher borrowing limits compared to credit card
- Lower personal loan rates are offered on good credit scores
Eligibility Criteria of Personal Loan for Self-Employed Individuals
Self-employed people can easily get online personal loans if they fall into the following eligibility criteria.
- Age and Citizenship: Self-employed individuals must be between 21 to 65 years old to apply for personal loans. Furthermore, they must legally belong to the country where they are applying for online personal loans.
- Credit History: Banks and financial firms examine creditworthiness based on their credit history. Credit history determines an individual’s responsible behavior toward their finances.
- Steady Income: A self-employed individual must have authentic documentation proving their steady income. Unlike salaried employees, self-employed individuals like doctors, engineers, and business owners must provide strong evidence of their income source. The documents comprise tax returns, profit and loss statements, financial statements, and so on.
- Business Stability: Lenders always assess if the self-employed individual has stability in their work or business. They also check the longevity of the work to determine that the self-individual person is well-established and qualified for a personal loan.
Personal Loan Options for Self-Employed Individuals
Self-employed individuals often get confused about where to apply for personal loans at low personal loan rates. Here are some popular funding options for self-employed individuals.
- Peer-to-Peer Lending: These are the online platforms for interacting with loan takers and lenders directly with each other. Self-employed individuals prefer lenders through these platforms due to the loan sanctioning in a shorter period of time at lower personal loan rates and fewer procedures involved.
- Non-Banking Financial Company: Non-Banking Financial Company (NBFC) comes under the Companies Act 1956 to engage in loans, stocks, debts, and so on. They differ from banks in lacking bank licenses. These are better preferred over banks due to fewer rules and regulations, lower operating costs, and the presence of competitive interest rates.
- Banks: These are authorized financial institutions to provide banking services. They offer both secured and unsecured personal loans depending on individual requirements and financial stability. They charge interest rates for sanctioning the loan. Individuals taking the loan are required to pay the money back in EMIs.
- Credit Union: These are member-owned, non-profit financial institutions. These are also preferred over banks for personal loans due to better interest rates and lower fees charged by individuals interested in taking loans.
Online personal loans for a self-employed individual are tailored as per their purposes and financial resources. There are many benefits of personal loans for self-employed individuals. If they have valid documents & good credit scores, they can avail loans at lower personal loan interest rates.
The eligibility criteria are smooth and easy to qualify by self-employed individuals. Furthermore, there are plenty of options from where such individuals can avail of a loan with low interest rates. It is advisable to compare the personal loan rates of different lenders and associated fees to maintain overall financial stability.
Frequently Asked Questions
Q1. How much creditworthiness should a self-employed person have to get a low-interest personal loan?
A self-employed individual should have a 750 or above credit score to avail loan at low personal loan rates and longer terms.
Q2. What is the full form of the CIBIL score?
CIBIL score is elaborated as the Credit Information Bureau India Limited score.
Q3. Can self-employed individuals get loans for marriage?
Yes. The personal loan covers marriage. Self-employed individuals can apply for a marriage loan if they meet the eligibility criteria for the personal loan.