Unlock the Pros and Cons of an Unsecured Personal Loan for Self-Employed

A huge number of people are opting for personal loans as there is no restriction on the end-use of funds. While salaried individuals can obtain this unsecured financial product without much hassle, it becomes a bit difficult for the entrepreneurs to avail the same.

This is because lenders follow a risk-return model before approving the debtors. As self-employed individuals tend to have an unpredictable income, lenders often spare a thought before giving the nod.

This easy feature indeed saves a lot of time of the consumers. You can also check out your pre-approved offer by submitting a few pieces of essential information on their website.

So, applying for an unsecured personal loan for self-employed is easier and convenient now. However, like all borrowing options, this loan also has certain advantages and shortcomings. Read on to get a better idea:

Pros:

1. It’s a multi-purpose loan

Perhaps this feature makes the unsecured personal loan or collateral free business loan more advantageous. Without any rigid use of fund, borrowers can have the freedom to utilise the money according to their will. From expanding and organising a small business to managing the finance on personal front, every funding requisite can be catered with this loan amount.

1. Quick disbursal

A borrower can get hold of the loan amount within 24 hours after verification of the minimum paperwork. So, with rapid processing and fast-tracking method, a borrower can access the fund in real time.

1. Substantial loan quantum

Moreover, individuals can ask for a higher loan amount to satiate their requirements. A borrower can even avail a sum that can range up to Rs. 30 Lakh. Therefore, hiring extra employees or even going for a dream vacation is no more a trouble for business owners.

1. Convenient repayment tenure

Many lenders provide a convenient repayment schedule to their customers. So, borrowers have the facility to choose a term that suits their repayment needs. Generally, NBFCs offer a tenure ranging from 1 to 5 years.

1. Flexi Loan facility

This unique facility allows a borrower to withdraw sums whenever he needs. The primary benefit is that he has the opportunity to pay only interest as EMIs and that too on the utilised fund. It greatly helps a borrower to low down his EMIs by up to 45%.

1. Easy-to-qualify criteria

Lastly, it is easier to qualify an unsecured personal loan or business loan eligibility criteria. An applicant needs to age within 25-55 years. And to ensure a lender’s reliability, he also needs to display a business vintage of at least three years.

Cons:

• Good credit score

Maintaining a sound credit history is crucial while applying for an unsecured personal or business loan. A higher credit score depicts the borrower’s financial stability and creditworthiness. Lenders evaluate prospective borrowers by their past credit activity before approving the loan, and also, creates the path for negotiating the business loan interest rate.

So, not having a good credit history can lead to rejection of the loan. Therefore, it is advisable to establish a CIBIL score of at least 750 before applying.

• Filing timely returns

Income tax return is a significant factor while evaluating unsecured personal loan for self-employed. Irregular income tax returns can act as a negative catalyst inhibiting the sanction of loan. Hence, one should file IT returns for at least the past 1 year.

• Type of business

Lastly, lenders prefer stable business over the seasonal business while approving personal loan for self employed. So, if a borrower is having a start-up or any volatile business, he might struggle during the initial phase of the application.

However, if he can show a steady income inflow and strong business plan, lenders usually give their consent.

Note: Any flaw in a business plan can also lead to the applicant’s rejection. Hence, before it’s too late, fix the flaws in business plans.

So, availing an unsecured personal loan or business loan is no more an obstacle for the entrepreneurs. With easy loan sanctioning criteria and plethora of advantages, these loan types are a boon for the business owners in the truest sense.

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