Every financial institution has a list of eligibility criteria. Listed below are some details which are taken into consideration by nearly every lending institution before sanctioning a loan for self-employed.
Credit history: Credit history is a collection of information of an individual’s past lines of credit, payments, and the total number of enquiries made by a financial institution of their business profile. Self-employed loan seekers with a credit score of above 750 may find their loans sanctioned faster compared to those who have a lower credit score.
A higher credit score represents that an applicant is responsible for his or her finances and has a history of timely repayments. It also shows that they are more creditworthy and present less risk to lenders offering a feature rich unsecured business loan.
Age: To apply for a personal loan for self-employed, a person should be between 21 and 55 years of age.
Business stability: An applicant should have at least 3 years of business vintage to apply and avail a personal loan for self-employed. A longer business tenor signifies stability and shows that a borrower is more likely to have a steady source of income to pay off the debt.
Previous year’s turnover: A lending institution will also look at the last year’s turnover of a business, audited by a chartered accountant.
Additional details which are checked by a lender
In addition to this, financial institutions will also look into the following information before sanctioning a personal loan to a self-employed individual.
Income Tax returns: A lending institute will always check whether all his/her documents related to income tax are correct. That is to make sure a borrower has paid his/her taxes on time. If a loan is applied for business purposes, then the lenders will check files related to that organisation’s corporate tax.
Income: In order to have a personal loan sanctioned, one needs to have a minimum monthly income. One major question which financial institutions asks prospective borrowers is about their documents related to their monthly income like bank statements, profit & loss sheets, etc. These also determine the amount a financial institution will provide as a loan. The minimum income criteria usually differ between institutions.
Personal loans have always been a boon for entrepreneurs who are trying to expand their organisation and tap into the booming business trends of 2018. This particular loan has a more straightforward process and documentation compared to that of a business loan. With the help of these personal loans, the economic growth of India has developed in recent years and will continue to grow in the future.