Once you have started your own business, one of the things that you may often grapple with is selecting the right kind of financial assistance to help your business grow. As a start-up company, you may explore the route of approaching venture capitalists. But what if you are self-employed and desperately need loans to help your business go to the next level? A personal loan for self employed can come to your rescue in these moments! Sceptics can often claim that loans for self employed are not the correct thing to explore. For those individuals, a business loan is a far more prudent option to consider to provide a boost to your business.
In the following paragraphs, we will illustrate why a personal loan can help augment your business venture. We will also talk about the application process.
Why choose a personal loan over a business loan?
It is important to remember that a business loan has an intended purpose – it has to be utilised towards the business. Simply put, it is provided to augment the business venture. In contrast, a personal loan for self employed is given to an individual. Once it is obtained, the individual has the freedom to utilise it for a variety of reasons including providing support to a business venture. Therefore, a personal loan is beneficial for your business when you are just starting out or are a self employed person such as a freelancer or CA.
Do I need to provide collateral for obtaining a personal loan?
This is one the key USPs of a personal loan for self employed – usually, there’s no need for furnishing any security. This also makes it very easy for those applying for loans for self employed because they may not have any asset of substantial value to offer as security.
Why is personal loan the best option to consider small businesses set up by a freelancer?
Let’s say you provide editing services on a freelance basis. You want to turn this into a business venture and are seeking financial assistance. If you were an established business, a business loan would have been the right way to go ahead. However, for a small business which is just starting, a personal loan for self employed can prove to be more advantageous. For a business loan, lenders will usually look at the business model and future projections. With a personal loan, those worries can be at bay.
What are personal loan documents required for self employed?
Other than necessary KYC documents such as identity, income, and address proofs, no other personal loan documents are required for self employed individuals. This is particularly helpful when you are starting a business venture and do not have enough documentation to apply for a business loan. A personal loan is also the ideal financial assistance to consider when you are about to execute a business idea and do not have an up and running business.
What is the rate of interest for personal loans? Is it possible to get better interest rates on a personal loan?
Typically, the rates of interest for a personal loan for self employed vary between 10% to 12% (subject to change). The final percentage of interest is decided based on the profile of the borrower. A borrower with a good credit record is likely to obtain a better interest rate. When the banks have the confidence that the borrower will repay the loan on time, there are better chances of offering the role at a much cheaper rate.
How to obtain the best repayment tenure for the personal loan?
Negotiating the typical amortisation schedule with your bank can depend on several factors such as interest rates and existing liabilities. There is not one foolproof method to ensure the best repayment schedule for loans for self employed. It will be usually decided on a case-to-case basis.