Critical Factors that Define Approval of Personal Loan for Self-employed

Critical Factors that Define Approval of Personal Loan for Self-employed

If you are a self-employed individual opting for a personal loan, a bank or an NBFC will take into consideration certain critical factors before approving your loan. As long as you meet the criteria, obtaining a personal loan for self employed for your business is fairly easy. With personal loans from NBFCs like Bajaj Finserv, you can borrow up to Rs.25 lakh and pay up to 45% lower EMI with Flexi Personal Loan facility. However, certain eligibility criteria required by the banks and NBFCs are lenient, while others are strict and decisive for your loan approval.

Here is a list of a few critical and defining factors for the approval of personal loan for self-employed individuals:

Your IT returns

Your income tax statement is crucial for the granting of any loan, including a personal loan. It is easy for self-employed persons to miss out on filing their tax returns, and doing so impairs your chances of getting a personal loan approved when you require it. Banks and NBFCs are particular about a borrower’s IT returns.

You need to maintain at least three year’s worth of error-free return filings for a loan to be approved. Not only do you need to file returns for yourself, but also for the income from your business.

Proof of Existence of Your Business

You need to produce documents to the bank or NBFC to which you’ve applied for a loan, proving the existence of your business for a period of time, generally at least above 3 years. Vintage of your business assures the financial institution about the credibility of your business, making it easier for them to approve your loan.

For a business that has only recently taken off, it is difficult to ascertain whether it is viable, due to a lack of data. Banks and NBFCs need the reassurance that you will be able to repay your loan in time, in order to approve the loan amount you have applied for.

Nature of Your Business

Banks and NBFCs often minutely examine the nature of your business if you are a self-employed individual applying for a personal loan. The purpose for this is to determine the stability and future viability of your business. Often, a financial institution would decide in favour, or against you, based on the nature of your business. Some businesses are seasonal and attract volatility. In these cases, a financial institution will most likely not grant an individual a personal loan.

The Income Your Business Generates

Your business revenue is a critical factor determining whether a financial institution will grant you a loan. When banks and NBFCs extend loans to self-employed individuals, the person’s income from his or her business speaks volumes pertaining to their ability to pay back the loan. Thus, having reasonably good income from your business will ensure that the financial institution you have applied the loan from decides in your favor and approves your loan amount.

AlsoRead : Pointers Self-Employed Individuals Should Consider Before Taking a Personal Loan

 

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