Comprehensive Guide to Personal Loans for All Individuals: salaried and self-employed.

Personal loans provide a financial cushion for various needs, whether you're a salaried citizen or self-employed. This guide explores the nuances of personal loans, including the best interest rates, eligibility criteria, and special schemes available for different categories: salaried, self-employed, unemployed/ unsalaried and some programs exclusive to women.  Read further to learn about various catered initiatives by financial institutions and the government for the moving hands. Whether you're looking to manage sudden expenses, start a new venture, or secure funds for personal growth, understanding the options available can help you make an informed decision.

Personal loan for salaried individuals

Personal loans for salaried is something we can discuss a little in depth. Why? Because 99% of the personal loans are for the salaried citizens. All the banks and other non-banking financial institutes provide personal loans if you have a good credit score and a stable income. 

Which bank provides the lowest interest rate for personal loans?

The lowest starting interest rate mentioned by banks may not benefit your personal loan. Why? The loan terms, like interest rate, principal amount, and other terms, depend on credit history, credit score, and other criteria like age, salary, employment, and relation with the current bank. However, we have curated this list of major banks' interest rates below. YesBank has a very low starting interest rate of 10%. However, from the list, SBI might be the safest bet, as the highest interest rate mentioned is 14.30%.

Your personal loan lender choice may be based on something other than the interest rates but other factors such as your eligibility for the loan and requirements, etc.

Data was obtained from the official sites of the banks in May 2024.

Learn more about NBFCs and their attractive offerings. 

Payday loan

A payday loan is based on your monthly income provided to you for a short time (likely a month). You are given a fraction of your salary to be paid back in a single instalment. As one can observe, it is a very short loan to manage your sudden cash crunch. Kotak Mahindra provides payday loans at 10% interest per annum. Eligibility for this type of short and unsecured loan are:

• Aged between 21-58
• Minimum net salary of Rs.10,000/- per month
• Salary account with Kotak 

Aadhar Loan

Besides needing for all of your authentication purposes, Aadhar can also help you lend some money. Using an Aadhar card, you can get eKYC-approved loans for up to 50 Lakhs! Since PAN and mobile numbers are already linked to the card, this makes documentation more accessible and helps with quick approval. Some banks that provide Aadhar loans are Piramal Finance, TATA Capital, Kotak, etc.

Other documents that may be required for the documentation are:

• Salary slip of past 3 months
• Bank Statement 
• PAN card

Depending on the banks, one can utilise this opportunity to secure funds, even if your CIBIL score is not up to mark.

Be it standard loans or payday loans, it's essential to have a good credit score for better interest rates and other benefits. But, most times, it takes more than that. So checking with lenders can give you better advantages and utilise your specific profile to get the best for you.

Personal loan for self-employed individuals

Self-employed individuals like salaried citizens can also receive excellent offerings from most banks. Lenders require proof of your ability to repay the borrowed amount. Lenders will grant you the loan if your business income is stable and positive. As a self-employed individual, you can also refer to the previous loan section. The primary difference will be the documents you submit as income and office address proof. Some offerings that are catered to self-employed are listed below:

DBS Personal loan for self-employed

 DBS Personal loans are attractive to the self-employed because of the low paperwork required for approval. Both salaried and self-salaried individuals can use this offering. Some features of the loan are:

• Interest rate: 10.99% to 23.99%
• Documents required for application: KYC documents such as Aadhar, PAN card, passport, etc.
• Bank statements are required only if the required amount exceeds the permitted limit.
• There is no need for Income tax returns or salary slips.
• A minimum monthly salary of Rs.25,000/- is needed to qualify for this loan.

All major banks provide attractive personal loans for all salaried and self-employed individuals. This loan stood out because of the less paperwork involved.

Some other schemes self-employed persons can utilise are listed below:

1. Pradhan Mantri Mudra Yojana- (PMMY)

Pradhan Mantri Mudra Yojana (PMMY) is a government scheme for non-corporate, non-farm small/micro enterprises. Loans up to 10 lakh are provided by various financial institutions, including banks and microfinance institutes, through the MUDRA scheme. Three loan categories are available, and applications can be made through the JanSamarth portal.

1. Shihsu Category: loans up to Rs. 50,000
2. Kishore Category: loans between Rs. 50,0001 and Rs. 5 lakhs
3. Tarun Category: loans between Rs. 5,00,001 and Rs. 10 lakhs

Mudra loans are provided to trading, manufacturing, and service companies to develop and expand their businesses

2. PM SVANidhi

PM SVANidhi loan is provided for street vendors who are integral to the informal economy. An initial capital loan of up to Rs.10,000/- can be taken for a year, which can be raised to higher amounts up to Rs. 50,000/- upon repayment of the initial capital. This unsecured loan facility can be utilised by vendors of vegetables, fruits, ready-to-eat street food, tea, bread, eggs, textiles, apparel, footwear, artisan products, books/ stationary etc.

3. MSME Loan Scheme in 59 Minutes

Loan processing has been a headache for every applicant. Checking and ensuring every document is there and waiting for confirmation takes time. SIDBI is trying to solve that with the MSME Loan scheme in 59 minutes. The loan process takes 59 minutes through a user-friendly website to apply for loans and digital approval for amounts up to Rs. 5 crores. With one application, you have 21+ banks and NBFCs at your disposal to select the best-suited offer to drive your business to higher heights.

More government subsidies and schemes can be found on the Udyamimitra website. There are numerous schemes provided by central and state governments based on the industry you are working on. 

Personal loan for unsalaried/ unemployed individuals

Getting a personal loan as an unsalaried person is difficult. Banks will consider you a risk since you can only substantiate your repayments with a stable income. 

Another way you can secure the amount is through secured loans:

1. Loan against property: 

A loan against property puts your property, such as land, house or any other belongings, as an assurance for the amount borrowed. This reduces the risk from the lender's perspective as they can recover their losses. Property loans provide high principal amounts with longer tenure and affordable interest rates.

2. Gold Loans:

Gold loans are a great way to acquire the amount that meets your requirements. You put gold as the collateral, and once you are done with the payments, you can get the gold back. Prominent banks, NBFIs and other local microfinance institutes offer this facility. With gold value never dropping, you can get an increased principal amount with time.

Other secured loans

Other than the popular loans based on property and gold, you can also get loans against other securities. Banks have numerous schemes of secured loans, such as the following:

1. Loan against Insurance policy: 

Insurances can help you in times of financial uncertainty as well!! Major financial institutes such as SBI, Bank of Baroda, Aditya Birla Finance, etc., offer loans in attractive terms. The eligibility terms depend upon the lender, and all major insurances are accepted.

2. Loan against Time deposits

The time deposits you put aside for the future may be helpful sooner. But you do not have to drop your deposit for the purpose. Instead, you can pledge it for a loan and repay it. So, you will still have your deposit at the end of the line. Axis Bank provides loans against time deposits at a mean interest rate of less than 10%. Banks like SBI and Bank of Baroda offer attractive terms that meet your requirements.

3. Loan against other securities

Besides the securities mentioned above, you can also borrow the amount against the following collaterals:

• National Savings Certificate
• Mutual Funds and Shares
• Sovereign Gold Bonds
• Kisan Vikas Patra (KVP)

Some institutes that provide these facilities are SBI, Bank of Baroda, HDFC, TATA Capital, etc.

Personal loans for homemakers and working women

Though there are miles to reach gender equality in society, it is incredible to see women pushing their potential, empowering and inspiring everyone. To facilitate empowerment, the government introduced many schemes that influenced the private firms to follow. This brought convenient loan terms and facilities for women to pursue and chase their dreams. 

Apart from the methods of personal loans and schemes mentioned earlier, women workers can also check out the following schemes catered exclusively for them.

Union Women Professional Personal Loan Scheme (UWPPL)

• Provided by Union Bank of India
• For salaried and non-salaried (self-employed) women with an annual income of Rs. 5 Lakh and above.
• Principal Amount: Rs. 50 Lakh based on the repayment capacity
• Interest is floating and starts at EBLR + 2.10%
• Minimum age should be 21 for salaried and 23 for non-salaried (self-employed) women. Maximum age 65

TATA Capital Personal Loan for Women

• Principal amount: Rs.40,000/- to Rs. 35 Lakhs
• Interest rate starting from 10.99% for up to 6 years
• Individuals must have 1 year of work experience and a minimum monthly salary of Rs.15,000/- 
• Aged between 21-58

BAJAJ Finserv Pesonal Loan for Women

• Principal amount: up to Rs. 40 Lakhs
• Interest rate from 11% for up to 8 years
• Salaried individuals in MNCs, Private or public companies
• Minimum CIBIL score of 685
• Aged between 21-80

More institutes like Hero FinCorp and HDFC are providing loans catered to their female customers to make their dreams come true!!

Government Schemes

Stand up India

Stand Up India aims to lend a helping hand to the SC/ ST and women entrepreneurs by lending a loan between Rs.10 Lakhs to Rs. 1 Crore for a green field enterprise (first-time venture of the beneficiary). It is facilitated through banks by providing the amount to at least one SC or ST borrower and one woman entrepreneur per branch. Other eligibility criteria are:

• Must be older than 18 years old
• The venture should be a green field that is a first-time venture for the borrower.
• If it is a non-individual enterprise, 51% of the shareholding and controlling stake should be held by the mentioned individual.
• Borrowers should not have any defaults.

The loan repayment tenure is for a maximum of 7 years with a moratorium of 18 months.

New Swarnima for Women

As part of the schemes for women's empowerment and pushing the nation forward, the government introduced the New Swarnima Scheme for Women, inculcating the spirit of independence among women of backward classes. Women of backward classes with family incomes less than Rs. 3 Lakhs are eligible for the scheme. The scheme provides eligible women with loans of a maximum of Rs. 2 lakhs at 5% interest. 

Another attractive feature is that the loan can be repaid for eight years, including a moratorium period.

Personal loans are versatile financial tools catering to salaried and self-employed individuals. You can make a well-informed decision that best suits your financial needs by understanding the various options, interest rates, and eligibility criteria. Whether you're considering a traditional personal loan, a payday loan, or government-backed schemes, it's crucial to evaluate all factors, including your credit score and relationship with the bank, to secure the most favourable terms. Stay informed and choose wisely to maximise the benefits of your personal loan.

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Author - Abhishek Sonawane

Abhishek Sonawane, an MBA graduate from the prestigious Indian Institute of Management Visakhapatnam(IIMV), brings over ten years of experience in the finance domain. His extensive background includes various roles in financial management and strategy, providing him with a comprehensive understanding of the financial landscape. Abhishek’s expertise and dedication to financial education make him an authoritative voice in personal finance, helping readers make informed financial decisions.