Personal Loan for Self Employed

A personal loan for self-employed is a unsecured personal loan that the self-employed can avail for personal or business use without any end-usage restrictions. Self employed are individuals who earn their income by running their own incorporated business.They can be divided into 2 categories:

• Self employed professionals: Banks categories doctors, dentists, surgeons practicing from their own clinics, chartered accountant, architects, consultants, interior designers as Self Employed Professionals (SEP).
• Self employed non professionals: These are businesses that are not categorised under self employed professionals and includes manufacturing, trading or services business enterprises.

Currently, Axis Finance offer the lowest interest rate on loans for self-employed starting at 13.00%. For salaried individuals, personal loans are given based on their income, job stability, size and reputation of the company they work for, CIBIL score and other eligibility factors. Also it is easier for salaried individuals to get approval on a online loan application for self employed as they can provide income proofs in the form of salary slips, ITRs and Form 16 from their companies.

However, when it comes to self employed, banks have to rely on the income tax returns and audited financial statements of businesses prepared and submitted by self employed and businesses on their own.

Personal loan for self employed has various features and benefits like:-

• Easy application: A self employed person can apply for loan easily either by visiting a bank branch with MyLoanCare through both online and offline modes.
• Flexible loan amount: You can take a loan for up to ₹ 8 Cr and less as ₹ 10,000.
• Minimal documentation: To avail self employed personal loan, you must have identity proof, address proof and income proof.
• Quick disbursal: Self employed personal loan is disbursed quickly. It usually takes up to 72 hours to get amount credited to your account.

If you are a self employed and want to take a loan from bank for personal or business purposes, you will be required to meet the following personal loan eligibility for self employed:

Parameter	Eligibility Criteria
Eligible Entities	Self Employed Professionals such as Doctors, Chartered Accountants, CS, Architects and others
Eligible Age	21 to 65 years
Income Tax Returns (ITR)	Borrower should have filed ITRs for a minimum of 2 to 3 years
Gross Annual Receipts	Should be more than ₹ 5 Lakh or more
Work Experience	Should have been running the practice for more than 3 years
Banking Stability	6 months bank statements checked for average bank balance, number of transactions and cheque bounces
CIBIL Score	650 or above

ITR – When you apply for a personal loan as a self-employed, it is mandatory to have filed an ITR of minimum 2 years. However, some banks and finance companies may require you to submit ITRs of minimum 3 years. Also, the lenders evaluate your repayment capacity based on the submitted ITRs and you may not get a Personal loan for self employed without ITR. In addition, you can also avail personal loan for self employed with ITR at the lowest rates.

Gross Annual Receipts - Gross Annual Receipts is the income earned without subtracting any cost or expenses during the annual accounting period. Most banks and NBFCs offers professional loans for doctors and other professionals with a minimum GAR of ₹ 5,00,000. However, check this carefully as few NBFCs and banks will approve an unsecured personal loan only to the self-employed with minimum Gross Annual Receipts of ₹ 10-15 lakh.

Work Experience – Work experience is an important factor banks and NBFCs consider when deciding to approve on your loan application form. It gives the bank or NBFC an assurance that you can repay the loan on time. Banks typically give Professional loans for doctors, lawyers, CA, CS and architects with a minimum work experience of 3 years. However, some banks and personal finance companies may insist on a vintage of 5 years as well.

Banking Stability – Banks and NBFCs study your banking history based on information in your bank statements of minimum 6 months to approve your loan. Banks check your average account balance, outbound and inbound cheque bounce information to evaluate your banking stability and capacity to repay the loan.

Credit History –Most banks consider your credit score before taking a lending decision. For self-employed, the bank checks the CIBIL of an individual, firm, and in some cases, the CIBIL score of joint owners in the business. As a businessman, a positive credit repayment track record and a good credit score will increase your chances of getting an easy loan from the bank.

Age – You should have a minimum age of 25 years and maximum upto 65 years at the time of loan maturity. However, some banks also give loans at the age of 23 years.

Other Factors – Bank also look at other properties owned by the borrower. For instance, a borrower living in his own residence or operating from an owned office will have a better chance of getting loan approval. In addition, banks also evaluate the past three years VAT returns to get a sense of the business's real turnover and to ensure that timely tax has been paid to the government.

If you are self-employed, the documents required for a personal loan are:

• Signed application form
• Passport size photographs
• Income Tax PAN copy
• Identity proof – Passport/ Driving License/ Voter ID/ PAN
• Address proof – Registered rent agreement/ utility bills which are not more than 3 months old/ Passport
• Income proof – ITR of last 2 – 3 years and 6 months bank statement
• Business existence proof – Service tax registration/ VAT/ business address proof/incorporation details in case of companies/ partnership deed
• VAT Returns and GST registration number

A self-employed person may find it difficult to get a personal loan for professionals with a low credit score. This is because banks are not keen to offer an unsecured loan if you have a low CIBIL score as lenders perceive the risk of default as high in such cases. Hence, in cases of low credit score, borrowers have a higher chance of getting a secured loan such as a mortgage loan or a gold loan.

Similar to bad credit personal loan, it is difficult to get a personal loan for self employed in India with no proof of income such as three years ITRs or audited financial statements. It is because banks find it difficult to estimate your repayment capability and , may not sanction a loan to you.

EMI for personal loan for self employed works on the same factors as that of a salaried borrower and includes the following -

• Loan amount – Higher the loan amount, higher is your loan EMI. Your loan amount eligibility will be a function of all factors related to turnover, growth, profitability, age, banking history and CIBIL score as discussed above.
• Interest rates – Lower interest rates reduce your amount of EMI whereas higher rates increase your EMI. Your interest rate will also be a function of an assessment of your risk profile by the bank. Higher the risk profile as per the credit assessment process of the bank, higher will be the interest rate.
• Loan tenure – Applying for a loan for a short period can raise your EMI or vice – versa.

Here are few illustrations which will help you to understand how the above mentioned 3 factors can impact your EMI

Mr. A, who is a doctor by profession, wants to open a new clinic for which he needs ₹ 10 Lakh. He has business stability of 3 years, has regularly filed ITRs and has a current net income of ₹ 60,000 per month. He is eligible for a personal loan of ₹ 10 Lakh from Bank X for a tenure of 5 years and an interest rate of 14%. The doctor, Mr. A has to pay an EMI of ₹ 23,268 for this loan.

Mr. B is an architect from Ahmedabad with experience of more than 5 years. He wants to open his firm in Gujarat. He is short of ₹ 10 Lakh in total for which he takes a personal loan from the bank after submitting all the essential personal loan documents required for self-employed (KYC, ITR of 3 years, bank statement of 12 months). He has a Gross Annual Receipt of ₹ 20 Lakh. His bank sanctions him a professional loan for 5 year repayment tenure at 15.60% interest rate. In this case, Mr. B has to pay an EMI of ₹ 24,106 per month.

Mr. C is a CA by profession and has setup his office in Delhi since 2010. Now, he wants to extend the same office as he has less space for which he needs a fund of ₹ 5 Lakh. He gets a loan at 14% rate for 3 years as he is earning ₹ 1,00,000 per month and can comfortably repay the loan in 3 years. The EMI he has to pay every month is ₹ 17,089.

The table below gives the EMI record of all the 3 cases discussed to understand the impact of various loan terms such as loan amount, loan interest and loan tenure on monthly EMI.

Name	Loan Amount (Rs.)	Interest Rate	Loan Tenure	EMI per month (Rs.)
Mr. A	10 Lakh	14.00%	5 years	23,268
Mr. B	10 Lakh	15.60%	5 years	24,106
Mr. C	5 Lakh	14.00%	3 years	17,089

✅Is collateral required for personal loan for self employed?

As personal loan is an unsecured loan and banks do not ask for any collateral or security. However, banks will thoroughly assess your ITRs, financial documents and other income-related documents to check your eligibility.

✅Which bank is best for a personal loan for the self-employed?

Axis Finance is the best bank for a personal loan for self-employed as it offers the lowest personal loan interest rates for self employed at 13.00%.. As per customer experience, Citibank offers the best customer service on personal loans with the highest rating of 4.2/5.

✅What is the online process to get a loan for self employed?

Self-employed professionals and non-professionals can apply for a personal loan online by visiting the official website of an online marketplace like MyLoanCare. The steps for an online process include checking self employed loan eligibility, filling personal loan details in the application Form, getting best offers and a final offer from our executive.

✅Is there any option for takeover of self employed personal loan?

Yes, banks give the option to transfer your loan from an existing bank to a new bank offering lower rate of interest on personal loan.

✅What is the tenure of personal loan for self employed professionals?

You can avail the loan for a minimum period of 12 months to upto 60 months. However, there are chances that few banks have a different tenure for instant personal loan for self employed or online personal loan for self employed.

✅Can I get a personal loan for self employed on ITR?

Yes, if you have filed ITR for a minimum of 2-3 years, you can get a personal loan on ITR. There are very few chances to get a personal loan without itr for self employed.

✅How can I get a personal loan without income proof?

If you have a good relationship with your bank, then the bank can give you a personal loan without income proof based on your timely payments and credit score.

✅How much loan can a self-employed get?

The eligibility for loan amount for a self-employed person may vary from bank to bank depending on factors such as CIBIL score, age, repayment capacity etc. However, you may get upto ₹ 8 Cr.

✅ What Proof of Income do you need for a personal loan for self employed?

If you are self-employed, you can submit the personal loan documents for self employed such as a gross annual receipt, ITR forms, and bank statements for income proof.

✅What are the best apps that offer personal loan for self-employed at the lowest rate?

Early Salary is the best loan app for self employed. Other apps that offer personal loans for self employed at the are lowest rates are Moneytap, Paysense. The interest rate for best self employed loan app is in the range of 13.00% to 26.00%.

✅What is the interest rate for a 50000 loan for self employed?

The lowest personal loan rates for Rs. 50,000 loan for self employed starts at 13.00%. Axis Finance offer the best online loan for self employed in India.