Personal loans are often described (and rightly so) as multipurpose loans as they are not given for a specific purpose like an education or auto loan. These loans can be used by the borrower in the manner they deem fit or as per their requirements. Thus these loans often come to the rescue of individuals when they are in need of funds for myriad purposes like supporting a ward's education when education loan is not available, in times of medical exigencies or for wedding of self or loved ones.
However even though personal loans are sanctioned for various purposes, the lender accepts a loan application only if the applicants meets the eligibility criteria. The criterion varies from one loan type to another and is also different for those who are self employed or the salaried applicants.
Whenever a lender extends a loan they do it after they are able to ascertain the creditworthiness and the repayment capacity of the applicant. This becomes especially important in the case of personal loans as there is no collateral backing them. So here are a few tips for the non salaried if they are looking at taking a personal loan:
As said earlier repayment capacity of the applicant becomes more important in these loans as compared to other loans as there is no asset backing them. When a lender tries to assess the repayment capacity of a salaried individual they may ask for the salary slip for last 3 or 6 months and may be specify a minimum time frame for which the applicant must have been employed in the current organization. This establishes continuity and stability of income. Those who are self employed also need to convince the future lender about the continuity and stability of their income. In order to this it is important that you have your financial statements and IT returns in order. So well before applying for a loan ensure your financial records are in order and not just for current months but for the past too.
While this important for all loans but for these loans it becomes extra important as discussed above. Salaried employees may find it easier to get loans even if their credit score is not so high due to special tie-ups that most organizations have with lenders. Self employed may find it harder to get loans without a good credit score. Some lenders may offer personal loans without CIBIL check but generally the rates for these loans are exorbitant and so it best avoid such loans. Maintain a good repayment record, keep the credit card spending under control and keep old debt on your report in order to keep a healthy credit health. A good score makes it much easier for you to get a loan sanctioned if you are self employed as lenders are assured of your credit worthiness.
While personal loans are easily available and most lenders offer them, it is still important for you to choose the right lender when you apply for a loan especially so if you are self employed. Personal loan interest rate is often considered the most important factor when deciding about which lender to approach for the loan. However before you apply for any loan do check the eligibility criteria laid down by the lender and ensure that you meet it especially so for the self employed. Some lenders may not extend a personal loan to the self employed; checking beforehand will help you save time and effort. Also remember all hard enquiries (a lender asking for your credit report) impact the credit score negatively.