Factors to Consider When Applying for Personal Loan For Self Employed

Whether you need funds for your wedding or are in a medical emergency, a personal loan can help you in any situation. It is one of the quickest ways to get cash amid a financial emergency. However, before you apply for a personal loan for self-employed, you must evaluate a number of factors, some of which are listed below.

Evaluate Your Needs: 

If you are looking for a personal loan for self-employed approval, make sure you evaluate your needs carefully. As a personal loan is an unsecured form of financing, the interest involved is slightly higher when compared to secured forms of lending. As such, if you don’t assess your requirement properly, you may fail to meet your monthly EMI obligations. To understand this in a better way, let’s take an example. 

Suppose you require Rs 1 lakh and depending on your profile, your personal loan’s interest rate is 13%. Now let’s say you didn’t evaluate your needs and took out a loan for Rs 5 lakh. Here, you would end up paying an extra interest rate on the amount that was not actually needed.

Maintain Healthy Credit History

When you apply for a personal loan for self-employed, the first and foremost thing that you need is healthy credit history. Lenders can use your credit record to determine if you are a responsible borrower. In addition, the better your credit history, the more likely your personal loan application will be accepted. Furthermore, having a better credit history will help you to obtain more appealing personal loan offers, such as affordable interest rates, higher funds value, and longer repayment tenures. However, if you have a poor credit history, you should try to improve it before applying for a personal loan by paying your credit card or any existing loan EMIs on time. Also, make sure you don’t fall behind on any EMI payments.

Check the Eligibility:

Every financial institution has its own set of requirements for personal loan eligibility. Whether we talk about the minimum required income, age, employment status, and so on, the eligibility factors differ from one lending institution to the next. However, most of the lenders grant personal loans for self-employed individuals whose age is between 21 years and 58 years. Furthermore, every lender assesses your loan repayment capabilities by calculating your debt-to-income ratio or evaluating your income and expenses. As such, before applying for a personal loan, use a loan aggregator’s website to compare the eligibility requirements of several lenders and choose the one whose qualifying criteria best match your profile. When you perfectly meet the lender’s eligibility criteria, you not only get better loan terms, but you also get a lower interest rate.

Additional Costs:

Most of the time, when a borrower applies for a personal loan for self-employed, they are solely concerned with the interest rate. Apart from the interest rate, the borrower must also consider a number of other charges. Some of these costs are processing fees, penalties on late EMI, rescheduling charges, and so on. All of these fees are added to the total cost of the loan. As such, evaluate the loan APR instead of the personal loan interest rate. You can compare the rates and fees of several financial institutions on their websites or on the websites of personal loan aggregators. Even if these fees are nominal, you should still consider them and choose the lender with the lowest APR.

Repayment Terms: 

Every borrower seeks flexibility when taking out a personal loan. The majority of personal loan providers in India, on the other hand, are very strict when it comes to personal loan repayment. The majority of them either refuse to foreclose on your loan or charge you with a higher foreclosure fee. Therefore, before applying for a personal loan, read the terms and conditions carefully before signing the loan application form.

Repayment Plan: 

Before taking out a personal loan, make sure you have a solid repayment plan. Consider all your existing financial obligations as well as your debt installment payment before deciding on a personal loan financing option. Evaluate your monthly expenses and check whether you are left with sufficient amounts or not. Because opting for a personal loan for self-employed and not paying your dues on time will cause your credit score to suffer. If you don’t have a solid repayment plan in place, you should reconsider taking this loan product rather than jeopardizing your future repayment capabilities.

To Conclude:

Personal loans are one of the simplest ways to meet an immediate financial need. They are easy to obtain and do not require any type of collateral. Because of the unsecured nature of the loan and the higher risk involved, the lender charges a somewhat higher interest rate than other loan types. As such, before opting for a personal loan for self-employed, consider all the above factors. 

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