In India, more than 50% of the population are self-employed, according to a survey conducted in 2020. A self-employed person requires monetary assistance from financial institutions during a medical emergency, sudden office inventory purchase, or for any personal reasons. 

During these unprecedented situations, a personal loan is the best choice since it does not require you to provide collateral and allows you to borrow for any purpose and repay the loan as per convenience.

But unlike a salaried person, a self-employed person has varied and inconsistent revenue. Hence, many wrongly assume it is difficult to get a personal loan while self-employed. 

It’s a false notion. 

A self-employed individual can easily avail of a personal loan with a good credit score and stable income. 

Financial institutions such as NBFCs and online fintech offer personal loans within a few hours with attractive interest rates. These days, online NBFCs are quickly becoming the favorite with their instant disbursement, minimum documentation, and flexible repayment options.

The article will shine a light on the process of getting a personal loan for self-employed people with a step-by-step guide to the procedure.

Features & benefits of a personal loan for self-employed

A self-employed individual can use a personal loan for both personal and professional expenses. It is one of the great benefits of a personal loan in addition to the points mentioned below –

Flexible repayment tenure

A self-employed individual can get a personal loan with easy repayment options. Generally, lenders provide 12 months to 60 months to complete the repayment. You can conveniently pay in monthly installments.

Unsecured loan

Personal loans are unsecured, and you can borrow the money without giving any collateral. It is a boon if you are self-employed since the business emergency might call for imminent action, and you might not be in the capacity to provide any security.

Quick disbursal of money

Personal loans for the self-employed come with an easy money transfer. They can be availed by visiting the nearest bank branch or applying online through a few trusted NBFCs like Money View. The formality to complete is not very complex, and you get the money within 72 hours.

Flexible loan amount

Personal loans guarantee a flexible loan amount to the self-employed after verifying the background of the type of business they are running. Banks and NBFCs offer up to INR 30 lac to fulfill this temporary but pressing financial need.

Serves multi-purpose

A self-employed person is eligible to apply for a personal loan to meet any purpose. The lender does not need to know why you want the loan. You can cover –

• Wedding costs.
• Expand your business.
• Consolidate all the existing debts.
• Increase working capital.
• Home interiors. 

The application process for availing a personal loan for self-employed

Starting with the application procedure, every lender needs you to meet minimum eligibility criteria and submit necessary documents before proceeding with the loan approval for self-employed people. Some lenders offer instant personal loans to the self-employed if you have an account with them. Getting an instant personal loan does not require any documents or verification.

Eligibility criteria

The lenders determine various aspects of your business and the income before giving personal loans if you are self-employed. Most of the lenders provide personal loans to business owners or self-employed professionals like doctors, architects, etc. after they meet the following criteria-

• Must be of the age between 25 – 65 years.
• Must be in business for a minimum of 2 years.
• Must have a decent CIBIL score of at least 600.
• Must have an annual turnover specified by each lender. It varies from lender to lender.

Documents required

The documents to support a personal loan application while self-employed are different from that of a salaried person. The lenders demand more documents from the self-employed during the application process because of the risks involved. 

For instance, you have good financial standing and profits, and the lender offers you a personal loan. But due to unforeseen circumstances, your business suffers a loss. Now, it becomes a question mark whether you can repay the loan. Hence, lenders require these documents only to double-check your income, liabilities, and monthly obligations.

• Identity card (Anyone): Aadhar card, Voter ID, PAN Card, driver’s license.
• Residential address proof (Anyone): Rent agreement, water/electricity bill.
• Business proof (Anyone): License, registration certificate.
• Bank statement for the last year.
• Income proof with ITR Report, TDS certificate, Form 16 certificate.
• Balance sheet including profit/loss statements for the past two years.

Personal loan for self-employed without proof of income and low credit score

Some lenders offer a personal loan to the self-employed without income proof. However, you need to have a good relationship with the lender and an excellent credit score. You can proceed with any of the following in such circumstances-

• Apply for a secured personal loan: You can get a secured loan by placing a mortgage on your property documents. The lender will consider this as collateral and immediately give you a personal loan.
• Apply with another applicant: When you have no income proof, you can apply with another applicant, and the lender will consider their ability to repay the loan.

Steps to proceed with the application

Once you’ve met the eligibility criteria and have all the documents ready, you apply for a personal loan. The process of getting a personal loan for salaried and self-employed people is almost the same. Let’s look into the simple steps to follow-

• Visit any nearby bank or NBFC and apply for a personal loan for self-employed people.
• Attach and submit all the essential documents.
• If you’re on good terms with the concerned bank and have a good credit score, the money will be transferred within 72 hours directly to your bank account.
• Online NBFCs have an easy process in which you can apply from your home or office, submit all documents online, and get the loan amount within 24 hours.

Where to get a personal loan for the self-employed?

If you’re a self-employed individual, you can apply for a personal loan by visiting a bank, NBFCs, or a fintech startup. The banks will verify your documents and do a background check thoroughly before giving the personal loan. So, it might take a long time for your loan to get approved.

On the other hand, it is even easier with online NBFCs like Money View. You can check your eligibility quickly within a few minutes and submit documents online. They require minimum documents compared to banks, and the funds are quickly transferred within 24 hours.

Interest rate and repayment

The interest rate for a personal loan for the self-employed varies. It mainly depends on your income, credit score, and your relationship with the lender. If you have gained the lender’s trust, then you can negotiate the interest rate. Typically, the interest rate for a personal loan for a self-employed person varies from 11% to 25%. 

Some lenders also provide special interest rates to self-employed professionals like doctors or architects, assuming they are less likely to default on the loans.

You can start the repayment process after one month of obtaining the loan. General advice is to start repaying the loan on time to avoid penalties.

Conclusion

It is easy to obtain a personal loan if you are self-employed if you have a good annual turnover and excellent credit score. But, as a personal loan has a higher interest rate because it is unsecured, choose the lender after scrutiny. Some lenders provide attractive interest rates with minimum paperwork. 

Since you take a personal loan in an emergency, ensure that you can repay the loan on time. Having a good relationship with the financial institution can guarantee an even better experience to get the loan if you are self-employed.