Should a self-employed opt for personal loan?
The rate of interest offered on personal loans usually depends on the loan amount and the repayment capacity of the borrower.
Personal loans work like any other loan, but it offers more flexibility and is pretty much available to everyone.
There are two types of personal loans namely secured and unsecured ones.
Generally, personal loans are sanctioned to salaried, non-salaried and self-employed individuals. However, the documentation and rate of interest is different for personal loans granted to the self-employed individuals.
The self-employed are those individual who own an unincorporated business all by themselves. They are known as sole proprietor of the business.
BankBazaar report says, "Though it might seem like it might be hard for self employed individuals to avail personal loans due to the fact that they are not salaried, that is not the case. They can easily avail personal loans without any hassles."
Many banks and financial institutions provide personal loans to self-employed individuals.
The only difference is that banks have stringent rules and some of the banks provide personal loans only for individuals with good credit, but NBFCs are more lenient while providing personal loans.
The rate of interest offered on personal loans usually depends on the loan amount and the repayment capacity of the borrower. Interest rate for this loan varies from different banks.
Here's a list of merits and demerits for sole proprietors who avail personal loans, according to BankBazaar.
Merits
- No restrictions on how the loan can be used
- Quick approval
- Option of using collateral
- Simple documentation
- Transparency
- Some banks offer additional benefits like personal accident insurance with the loan
- Competitive rates
Demerits
- Higher interest rate compared to other loans
- No part payments
- A good credit history is important to avail a personal loan
- Mandatory bank account
- Late payment charges apply
A self-employed needs to give documents like proof of identity, address proof, audited financials of the recent two years as a proof of income, last 6 months' bank statement, office address proof, proof of workplace ownership, proof for continuity of business and two passport size photographs.
If you are sole proprietor and are planning to avail person loan, remember these points.
Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.
RECOMMENDED STORIES
Navratna SIP by Anil Singhvi: This Tata Group stock can double your money - Check targets | Stock To Buy For Long Term
Stocks to Buy for Long Term: 1 smallcap, 3 midcap, 8 largecap stocks analysts are upbeat about; check out targets for your portfolio
Top 7 mutual funds in the last 10 years: What Rs 10,00,000 lump sum investment in each is worth now?
03:48 PM IST