Comparing Personal Loan For Salaried Employees Vs Self Employed

Salaried people can avail themselves of higher personal loans as compared to self-employed people. Since self-employed people have uncertain incomes, there is a high element of risk in lending to them. But, whether it is salaried or self-employed individuals, lenders look at important parameters like credit profile, financial discipline, and repayment history. Let us now understand how the personal loan for salaried differs from a personal loan for self-employed. 

Personal Loan For Self-Employed

Self-employed people like doctors, lawyers, and chartered accountants can avail a personal loan under the self-employed category. As a self-employed person, you may need funds to expand your business or to fulfill other financial requirements. You can then get a personal loan easily. 

Advantages and Features of Personal Loans for Self-Employed

No security or collateral required: You don’t need a collateral or a guarantor to obtain the personal loan for self-employed. 

Seamless or hassle-free process: You can avail the personal loan with minimal documentation, and the entire loan processing journey right from application to disbursal is completely digital. 

Interest Rates: Personal loans for the self-employed could have higher interest rates. This is because when there is a certain element of risk involved, the interest rates are usually higher. Since a self-employed individual has uncertainty in his business and his income sources may not be stable, the lender may be doubtful of his repaying capacity. So, interest rates on personal loans for the self-employed may be higher. 

Flexibility  in repayment tenure: You can enjoy a flexible repayment tenure for personal loans for self-employed. Based on your lender, you can extend your personal loan tenure for up to 6 years. Some lenders allow borrowers to repay the amount when they save extra money. 

Large Loans: You will get approved for large loans according to your loan eligibility. 

Instant approval: After the borrower applies for the personal loan online, there is very minimal documentation and verification involved. The loan is approved and disbursed instantly. 

No end restriction of usage: The money from the personal loan can be used for absolutely anything right from paying your medical bills to funding your vacation. However, it should not be put to any illegal usage. 

Personal Loan Eligibility For Self-Employed

• Age: The minimum age of eligibility varies across banks. For some banks, it may be in the range of 22 years to 58 years. For others it may be up to 60 years. The minimum and maximum age for a personal loan are lower for salaried individuals with some lenders. 

• Professional documents that include company registration or business registration certificate. This is for proof of occupation
• Income proof documents like profit and loss statement, IT returns, and bank statement of six months. 
• The number of years the business has been operational should be minimum. This criteria varies across banks and other lenders. While some banks may ask for a period of 6 months, there are other banks that may ask for a minimum existence of 2 years. 

Documents Required To Apply For A Personal Loan For Self-Employed 
 

Interest Rates Offered by Top Banks and Financial Institutions for the Self-Employed 
 

 

Features and Benefits of Personal Loans for The Salaried

• Salaried individuals are offered personal loans at attractive interest rates 

• The loan amount may not be too high due to tax calculations, deductions, and the retirement age of 58 to 60. 
• No collateral required
• The loan tenure is flexible and is usually up to 5 or 7 years. 
• There is no end usage restriction for the loan amount and it can be used for anything right from paying your medical bills to funding your holiday
• Loan approval is very quick as there are minimal documents, and it can be applied easily online. 
• Many lenders also offer pre-approved instant personal loans to select customers depending on their age, monthly income, banking industry, and other aspects of their credit profile.

Personal Loan Eligibility For Salaried

• The minimum eligibility age varies across banks. The minimum and maximum age for salaried people is lower than self-employed for some lenders. 

• Income proof should be shown through Form 16, salary slips, etc. Bank statement of the previous 6 months where salary gets credited.
• Minimum income requirement that varies across banks
• Proof of income tax returns
• The minimum work experience varies across banks. It can range from 6 months to 3 years based on the loan amount and the repayment history. 

Documents Essential To Apply For A Personal Loan For Salaried Employees
 

 

Interest Rates Offered by Top Banks and Financial Institutions for the Salaried Employees

 

 

Conclusion

Even though most criteria for personal loans for salaried and self-employed individuals remain the same, they differ with respect to some features, documents, and eligibility criteria. A good credit score and repayment history will help in getting a personal loan easily and instantly whether you are salaried or self-employed

FAQs

1. How can individuals apply for a personal loan for self-employed?

Login to the bank account, app, or any of the bank’s online services where you can apply for a personal loan digitally. Provide KYC documents, income with the application form, employment type, and address proof documents. Also give a cheque for the processing charge. Fill in all the details regarding income and self-employment. The bank will conduct the verification process and approve the loan amount as per your eligibility. Post that, you have to sign the agreement and other forms. 

2. How can individual apply for a personal loan for salaried?

Login to the bank account, app, or any of the bank’s online services where you can apply for a personal loan digitally. You can also visit the branch physically to apply for the loan. Provide KYC documents, address proof, type of employment, and salary proof with the application form. Also, issue a cheque for the processing charge. Fill in all the details regarding income and employer. The bank will do the verification process and approve the amount based on your eligibility. This is followed by the signing of the agreement and other forms.