How Proprietorship Company Employees Can Avail A Personal Loan?

A personal loan can prove to be extremely useful when a person needs some additional money urgently such as to bridge the shortage of cash in a family wedding or for renovating their home or dealing with a medical emergency.

Indeed, to meet immediate short-term financial needs, a personal loan from a bank or non-banking financing company is an easy and rapid option to acquire money. A personal loan is an unsecured credit instrument, which means the borrower won’t need to give the lender any collateral in order to obtain the loan.

Most people, whether salaried or self-employed, often have no trouble obtaining a personal loan as long as they can provide evidence of a reliable source of income and have a credit score that is at least 680. However, individuals employed in proprietorship enterprises may occasionally struggle to have their loan requests accepted.

Personal Loan For Proprietorship Firm Employees

Proprietorship firms are usually owned by one person, or the proprietor. These entities are privately held businesses and are not listed on any stock exchanges. Typically, these are small or medium-sized businesses.

Employees of proprietorship firms, like any other borrower, will have to submit a few documents to take out a personal loan. These include:

• A duly filled loan application form with a photograph;
• Age and identity proof such as PAN card, voter ID, driving license, or Aadhaar card;
• Proof of residence such as electricity bills, voter ID, driving license, or Aadhaar card.

Some banks and NBFCs may be wary of sanctioning loans to people working in such firms based solely on their credit scores and incomes, and may seek stronger proof of their ability to repay the money on time. In such cases, they may seek additional information from employees of proprietorship firms during the loan application process.

There are a few steps people working for proprietorship firms can take to ensure their personal loan application is approved.

Show Stable Source Of Income:

People working with proprietorship firms should show a stable source of income with proofs such as salary slips and bank account statements. It would be even better if they can show any other sources of income, such as rent from a house or a shop, to convince the lender of their repayment capability.

Credit Score:

Lenders prefer giving a loan to people with a credit score of 750 or above. A person can build a high score by repaying loans timely. A strong score helps in rapid loan approvals and also in getting a higher amount sanctioned at affordable interest rates.

Close Other Loans:

A borrower should pay off other outstanding loans before seeking a new debt. If they can’t fully repay an existing loan, they should at least reduce the outstanding principal amounts and lower their debt-to-income ratio. This will increase their loan eligibility.

Compare Lenders:

Prospective borrowers should do some research and compare various parameters, interest rates and repayment terms of several lenders. In case their proprietorship firm has banking relationships with any bank or NBFC, it could increase their chance of getting a personal loan from that lender.

Avoid Multiple Loan Requests:

Applying for more than one loan at a time can make borrowers look desperate and risky, making loan approval less likely.

Conclusion

The personal loan process is usually simple and quick. Most lenders sanction personal loans in just a couple of days and that too on the basis of basic paperwork that can be completed within a few minutes.

However, borrowers working in proprietorship firms may face some problems in getting their loan sanctioned. In such cases, they should ensure they have a high-enough high credit score and have adequate income proofs in hand. They should also compare lenders and pay off other loans before applying for a new loan.