Personal Loan: A personal loan in India is a great choice for self-employed individuals. You can meet all kinds of short-term business requirements. This will include expanding a space via structural changes, purchasing new equipment, upgrading to newer technologies or payrolls of employees. But the road to getting the loan approved could be bumpy for a few reasons. For example, you must have a stable and steady income. It shows your repayment capability. This is usually not a problem for salaried individuals who have a fixed pay scale.
The good news is that there are ample ways to boost your eligibility for the loan. These are simple and does not require you to set aside collateral. Take a look.
Ø Positive Repayment History
Lenders of small cash loans on Aadhar cards will want to check your credit report. This is proof of how successfully you have repaid the EMIs of previous loans. So, try to maintain a clean record. Do not skip a single payment since it will reflect on your profile. Clear all the bills on time and avoid maxing your credit card.
Wait and improve the score if it is below 750. Anything above this mark is considered good. The higher the numeric figure, the better are your possibilities of getting the loan approved.
Ø Required Documents
Banks have specific documents required for personal loans for self-employed people. Make sure to arrange each one without missing out on any.
You will need:
- Latest 3 months’ bank statement
- Sales deed and latest utility bill in the name of the current owner
- Municipality tax bill or GST certificate
You will also need a PAN card/Form 60 and identity and address proof in the form of a valid passport/Aadhar card/driving license or voter’s identity card. The copies must have the exact information as that in the original papers.
Ø Second Income Source
An alternate income increases the odds of getting a personal loan. Rent out your property, opt for freelancing, invest in mutual funds or set up a savings account. These are passive ways to improve cash flow in your household. These must reflect in your financial status. Try to include the incentives and bonuses paid to employees. Banks might consider these while reviewing your loan application.
Ø Avoid Simultaneous Loans
Try to repay all your debts before applying for a small cash loan on an Aadhar card. Or else it shows up in the hard enquiry and banks might fear a risk of default. The request is likely to get rejected on this ground. Further, try not to apply for multiple fresh loans at a time. It is a sign of being desperate for money which is not a great impression upon banks.
Ø Debt-To-Income Ratio
Try not to spend more than 40% of your income on EMI. Keep the ratio as low as possible. This will determine the borrowing risk of an individual. Banks will know that only a small percentage of your income goes towards existing debts. So, you are capable of repaying the new personal loan. This helps you qualify for the loan.
You can think of a personal loan balance transfer in case of existing loans. This will lower the EMI burden and help you qualify for another. Further, pick a longer tenure to maximize the approval chances of your loan.