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Self-Employed Individual Applying for Personal Loan?


A personal loan for self-employed or a personal loan for salaried employed is the simplest and quickest credit option to meet the immediate need for finance. With no security or collateral, instant loan disbursement, the loan has zero restriction on the end-use. Whether you are salaried individual or a self-employed one, a personal loan can help you mitigate all your financial needs. However, in the situation of self-employed, eligibility criteria to attain loan approval is different from their salaried counterparts. Lenders usually review the applicant’s profile, business turnover, vintage of the business, annual income, and other factors for determining the eligibility and interest rate for personal loan approval.

Here are 5 most important factors that affect the decision of a lender on a personal loan for self-employed:

Income & Business Turnover

Lenders factor in your minimum annual income as one of the eligibility criteria while evaluating your application. If your net income is below the set limit, then it may result in loan application rejection. Apart from this, lenders also put a lot of emphasis on your business turnover. They usually require previous 3 fiscal years profit or loss statements to estimate the performance and financial position of your business. Thus, for a self-employed individual, sales and revenue form a major foundation for personal loan approval.

Income tax returns

Income tax returns are a crucial factor considered by lenders when evaluating your personal loan application.  To verify your income, they usually check your previous 2 to 3 years income tax returns statement. Irregular income tax returns can prove to be detrimental, hampering your chances of loan approval. Hence, it is necessary for you to file your tax returns timely. The income tax returns required by the lenders usually include returns filed in your name and in the name of your business.

Nature of Business or Profession

The nature of your business plays an imperative role in the evaluation of your loan application. Lenders usually prefer stable businesses (dairy, textile, paint, alcohol, telecommunication etc.) over volatile/seasonal businesses (firecracker, Holi colours manufacturing etc.). They are generally apprehensive regarding lending those with volatile/seasonal business models because of their risky nature, which makes them doubt their potential to repay the personal loan.

Credit profile

Whether you are self-employed or salaried, a credit profile is one of the essential factors that lenders check while evaluating your personal loan application. As a personal loan is not backed by any security/collateral, lenders carefully evaluate your credit report, which involves all the details of your credit history regarding your loans and credit cards. Applicants with a credit score of 750 & above may get loan approval, while those with lower credit scores may not or may avail of a loan at a higher rate of interest. Unlike secured loans such as car loans, loans against property, home loans etc., where the collateral value becomes an essential element in deciding your credibility, a credit score is the most crucial constituent in the case of a personal loan. A credit score displays your creditworthiness as a borrower and assists lenders in determining the associated risk involved in lending you. Hence, reviewing your credit report regularly helps you figure out where you stand and tells you whether you require to take any urgent or immediate steps to improve your score. As all the 4 credit bureaus provide free credit reports once a year, therefore you must disseminate your request for free credit reports in such a manner that you are able to review a report once in 3 months. 

Also, when you are applying for a personal loan in India, you should avoid applying with multiple lenders. Each personal loan application is recorded in the credit report as a hard enquiry for which the credit bureau lowers a few points of your credit score. Thus, submitting multiple enquiries in a short span of time can be detrimental as it can significantly decrease your credit score. Moreover, as for a self-employed individual availing, a personal loan is a little difficult as compared to salaried individuals because of stringent processes. Therefore, for them maintaining a good credit score is even more vital as it improves their chances of availing personal loan approvals.

Age of business and your experience in the field

The older your business or practice is, the higher is your chances of getting your loan approved. This convinces the lenders of the sustainability and reliability of your business and hence improve your chances of loan approval. Your business/practise must have at least 2 years of operational history to avail loan approval. Some fintech may also grant loan approval to those with an established business having an operational history of around 1 year. 


Personal loan needs differ from lender to lender, but there are some considerations such as income and credit score that the banks or NBFCs always look at when assessing applicants. Before you begin applying for a loan, you must familiarize yourself with some of the common qualifications you will require to meet and the crucial documentation you will require to provide. This specific knowledge can assist streamline your application procedure and might ameliorate your chances of qualifying for the loan. 

If you are a self-employed employee looking for a personal loan at a competitive interest rate with minimal documents, the online platforms are the prudent choice. Not only is the whole procedure of personal loan application to disbursal thoroughly online helps you save money and time; loan amount is easily processed within a day of loan approval.

Crucial steps to await the personal loan for self-employed individuals are: 

  • Check your personal loan eligibility
  • Choose the correct plan
  • Upload your documents asked by the lender
  • Avail the loan amount within the same day of loan application in case of instant loan approval platform. 

You may get loan amount approval within 2 to 7 days in the case of banks or NBFCs. Thus, if you are in immediate need of cash, ensure to opt for the instant loan platform after comparing among various lenders.

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