5 Essential Things to Consider Before Availing a Personal Loan if You are Self-Employed

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first time personal loan

It is essential to gain complete information about a personal loan before applying for it to increase the chances of availing it in the shortest span of time.

Availing such unsecured loans can become crucial to fund various needs like consolidation of debt, paying off medical bills, renovation of home, etc. A self-employed individual may have several other financial obligations that can be efficiently met by securing such finances. Today, many lenders in the market extend this unique financing option with attractive rates and other borrower-friendly features.

However, choosing one personal loan provider over the other does not entirely revolve around the lowest interest rates offered. Other factors play in too, that either increase or reduce the overall cost of availing this loan. Besides, the features may or may not always turn out favourable as per your financial status.

When seeking this loan as a self-employed person, you must consider a few essential things that will help you arrive at the best credit option to finance your personal or business needs.

5 things to consider before you avail a personal loan

  • Purpose of availing this loan

As the name suggests, credit options availed to meet personal needs like constructing an extension of the house, payment of credit card bill, settlement of debt, vacationing, etc. The amount of loan you apply for depends entirely on the amount you need to fund such necessities.

Apply only for the amount that you need to pay off or spend. For instance, lenders offer up to Rs. 25 Lakh with their Personal Loans for Self-employed. As per your creditworthiness and income status, you may be eligible for such a substantial loan amount. However, it does not mean you must avail the entire available amount.

  • Assessment of the total cost of the loan

Personal loans are unsecured loans and hence involve high risk for lenders. To cover this risk, they often keep the lending rates and other associated costs higher than on secured loans. So, it is essential that you factor in the total cost of loan, i.e. the principal and the interest to be paid in total throughout the tenor, as well as the various other essential charges on personal loans.

Choose a loan that requires minimal charges. You can avail a Personal Loan at minimum processing fees with considerably low part-prepayment and foreclosure charges. It reduces the total cost you pay for availing the loan.

  • Your credit score

A credit score is the primary pointer via which the lender assesses your creditworthiness. It is an essential consideration lenders make when evaluating applications for personal loans. Generally, a credit score of 750 and above is required to avail a personal loan for self-employed.

Before you apply for this loan, make sure to check whether you have a good credit score. It will help in gaining loan approval quickly. Maintain timely repayment of bills and debts to keep this score high and increase your chances of loan approval. If you have a good credit score and you meet other eligibility, you may plan ahead and look for guidance to even get a personal loan for travel.

  • Your eligibility to avail the loan

To avail a personal loan for self-employed individuals, the applicant will need to meet basic eligibility criteria such as –

  • Meet the age criteria of between 22 and 55 years.
  • Have a business vintage for a minimum of 3 years.
  • Have IT returns filed for a minimum of past one year.
  • Get the turnover of last year for his/her business audited by a CA.

Make sure you meet these eligibility criteria before applying for the loan. Satisfying them will result in a successful application.

  • Choice of lender

Selecting the right lender becomes a crucial point in availing a personal loan for self-employed. The features you get to enjoy depend strongly on the lender you choose. Therefore, make sure that you do proper market research before selecting the lender.

Look for factors like –

  • Rate of interest on offer.
  • Loan repayment tenor options available.
  • Total loan amount available.
  • Other related charges.
  • Terms and conditions along with facilities they offer.

The best lender will offer a balanced mix of all these features that help you meet your immediate funding requirements. It will also help you manage finances in the future by making repayments easier.

Check for this and such other offers to apply for a personal loan for self-employed individuals with the best lender. Once you have availed it, make sure you pay the EMIs before the due date to keep your credit score healthy.