Personal Loans for Self Employed

Credit and Loan

Personal Loans for Self Employed

By Jupiter Team · · 7 min read

A personal loan can be used for a variety of reasons like going on a vacation, renovating your home, or buying an electronic appliance.

Several banks offer unsecured instant personal loans to salaried professionals based on their payslips, job stability, and other relevant factors.

If you are a self-employed professional, you can avail of a personal loan using your income, ID, and address proof.

Read on to understand more about a personal loan application for self-employed individuals.

Features and Benefits of Personal Loan for Self-Employed

Whether you are a self-employed doctor or you run a small manufacturing unit, there are several benefits of applying for personal finance.

Simple Application Process

If you have your documents in place, then you can avail of an instant personal loan. You may apply for one on the official website of the lender, visit their branch directly, or go through trusted third-party platforms.

Flexible Loan Amount

Whether it is INR 10,000 or INR 20 lakhs, personal loans for self-employed persons are available over a wide range of amounts.

Comfortable Repayment

From 12 months to 60 months, self-employed people applying for personal finance can choose their tenure for repayment based on their requirements.

Quick Disbursal

Once your personal loan is approved, the amount generally gets credited to your bank account in just three to five working days.

Basic Documentation

Most banks require three main documents to be submitted for a personal loan application, which include proof of ID, proof of address, proof of income.

Documents Required for Self-Employed to Get Personal Loans

In addition to the documents mentioned above, make sure you submit the following for quick processing.

  • Duly signed application form
  • Passport-sized photographs
  • A copy of your Permanent Account Number (PAN)
  • Proof of the existence of your business, such as certification of incorporation, service tax registration, Value-Added Tax (VAT), and other documents of relevance
  • VAT returns and Goods and Services Tax (GST) registration number
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Eligibility criteria

Now that you know what the benefits are, let us take you through personal loan eligibility.

  • You must be a self-employed professional such as a doctor, lawyer, architect, chartered accountant (CA), etc.
  • You must be over 21 years of age but not older than 65 years.
  • You must be able to present filed Income Tax Returns from the last two to three years and bank statements from the past six months, at least.
  • You must have an annual income that falls within the requirements of the bank.
  • You should have been in the business for a period of at least two to three years, at the time of loan application.

Process to Apply for Personal Loan for Self-Employed

You now have all the information you need to prepare for your personal loan application. The next step is going about the application.

If you want to apply for a loan, you may directly approach the bank or go through an authorized third-party loan provider. Generally, this is how the process looks.

  • You visit the official website of the lender or the third-party platform and fill in an application form online. Alternatively, you may visit the branch directly.
  • Depending on your requirement, someone from the bank will call you. In the case of a third party, you might get a call or an email from more than one bank or lender.
  • Once you have a lender, you may get started with the documentation. On third-party websites, you might need to fill in a lender-specific application form.
  • Next, upload your documents online or have someone from the bank/lending institution pick them up.
  • In the next couple of days, you will receive a verification call from the lender.
  • Once the verification is complete, your loan will either be approved or rejected, and you will be informed about the status.

Planning for Your Personal Loan

Here are the 3 main elements of a personal loan:

The Amount of the Loan

Your equated monthly installment amount (EMI) is directly proportional to the amount you borrow. It is a function of the size of your business, your turnover, your age, banking history, your credit score, and much more.

The Interest on the Principal

This depends on your creditworthiness and is inversely proportional to it. So, if you want a low-interest personal loan, you must have high creditworthiness.

The Loan Tenure

If you choose a short repayment tenure, your EMI will be higher, and vice versa. So, these are inversely proportional. Moreover, it is advisable to choose a shorter term to save up on the interest component.

Emi Calculation for a Personal Loan for Self-Employed

To determine whether you can afford to pay the EMI, you may make use of an online EMI calculator.

Here is an example to understand this concept better. Let’s say Mr. Naidu wants to avail of personal finance for a period of three years.

He has been in the business for three years and makes a net income of INR 65,000. He is eligible for a loan of INR 7 lakhs for a tenure of three years with a personal loan interest rate of 11%.

You can calculate his EMI manually, using the formula P x r x [(1+r)n \ {(1+r)n -1}

where P is the principal, r is the rate of interest, and n is the tenure in months.

So, the EMI is

7,00,000 x 11% x [(1+0.11)36 / (1+0.11)35 ] = 22,917

To avoid deriving it manually, you may make use of an online EMI calculator.

Personal Loans for Self-Employed - Interest Rates and Other Charges

Financial institutions offer various amounts, interest rates, and tenures on personal loans. They may also charge processing fees, prepayment charges, and much more.

Here’s what some of the best banks for personal loans offer. Please note that these rates may vary based on the lender.


Loan amount 

Loan tenure 

Rate of interest


Up to INR 25 lakhs

12 months to 72 months

10.50% per annum (p.a.) - 19% p.a.


INR 25,000 to INR 5 lakhs 

12 months to 60 months

9.50% p.a. -14.00% p.a.

Fullerton India 

Up to INR 25 lakhs

Up to 60 months

11.99% p.a. onwards


Depending on the lender’s terms and conditions

6 months to 60 months

9.50% p.a. - 15.00% p.a.


Up to INR 30 lakhs

12 months to 60 months

9.99% - 16.49%

Factors to consider before applying for a personal loan for self-employed

Before you go ahead with the personal loan application, consider the following four factors.

Keep a tab on your credit score

Your credit history can play a significant role in deciding the status of your current loan. So, keep a constant check on your credit score and apply for a personal loan only if you have a good score.

Assess your financial strength

Once you pay your EMI, carefully evaluate your ability to bear other expenses. Before you proceed with your personal loan application, it is important to determine this.

Look for hidden costs

In addition to the loan amount you have applied for, there are other costs like processing fees, late payment fees, foreclosure charges, and many more that need to be accounted for.

Make a quick comparison

There are various lenders offering low-interest personal loans to choose from, so narrow down your options. Make a list of parameters that matter to you and see how each lender performs across these.

If possible, refer to a single website that sources all the information, so you do not waste time browsing through different websites.

Personal loan for self-employed individuals with a low CIBIL score

Everything is not lost if you have a low credit score. Traditionally, the best banks for personal loans preferred borrowers that had higher Credit Information Bureau (India) Limited (CIBIL) scores.

However, you might be considered by specialized banks that cater to those with lower scores. Generally, if your loan application is approved, despite you having a low credit score, you might need to pay a higher rate of interest.

Frequently Asked Questions (FAQs)

My CIBIL score is low. Can I get a personal loan?

A few banks and non-banking financial companies (NBFCs) do provide loans despite low CIBIL scores. However, in that case, you might need to present collateral and pay higher interest rates.

I don’t have any proof of income. Will I get a loan?

Any bank or lender requires that you submit proof of your income to exhibit your financial stability. So, you need a supportive document like an Income Tax Return or a bank statement.

I don’t have any IT returns filed. How can I still get a personal loan?

Most personal loans for self-employed are approved based on your income. If you haven’t filed any IT returns in the past, you might not fulfill the personal loan eligibility criteria of many leading banks.

My business is less than two years old. I need a loan. How can I get one?

Most banks require that your business be active for at least two to three years before you apply for personal finance. However, a few banks or NBFCs might make an exception.

I want to transfer my loan to a bank that charges a lower interest. Can I do that?

Yes, you can request your bank to transfer your loan to the bank of your choice. A few banks might charge a nominal amount to do this.

What if I am unable to pay an EMI?

Most banks will charge you a penalty for missing an EMI. Please note that it can also have an impact on your credit score.

Is there a processing fee to process my personal loan application?

Most banks charge a fee that is equal to 1% of your loan amount plus GST. However, there can be small variations.

Can I use my personal loan for my business?

Yes, most banks allow for personal loans to be used for business purposes as well.

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