As of June 2018, growth in loans to the service sector has improved by 23.3%, according to data published by the Economic Times. A significant portion of such growth is accredited due to easier availability of loans to professionals.
There are 4 kinds of loans which professionals can avail in India, namely personal loans, business loans, home loans, and loans against property. Personal loans and business loans are unsecured credit facilities.
Borrowing professionals are not required to pledge any asset as collateral with the lender to avail the advance. On the other hand, home loans and loans against property are secured credit facilities requiring a property as a mortgage against which the loan is sanctioned.
Regardless, there are certain parameters or rules which professionals such as chartered accounts must take into consideration before applying for any loan facility.
5 rules to follow before applying for a loan for professionals
In case you are applying for any form of a customised professional loan as a CA, you should duly follow the rules mentioned below to make an informed decision. It would allow you to sync the loan variables along with your financial position.
Rule 1 – Check your credit score
When availing a professional loan for CA, you should first take into consideration the minimum credit score which you need to successfully apply. Reputed financial institutions necessitate a minimum CIBIL score of 750 or above for loan approval with the most beneficial loan terms and features.
While several lenders consider an applicant with a credit score below 750, the interest rate charged is higher minus repayment-friendly terms and features.
A credit score is an essential component which provides a quantifiable measure of your creditworthiness and how likely you are to repay as agreed upon.
The calculation for CIBIL scores takes into account your credit history, repayment history, etc. You can consider how CAs can increase their CIBIL score in case you possess a score below 750.
Rule 2 – Ensure minimum years of practice
Different financial institutions consider varying years of practice as sufficient for loan approval. In most cases, 4 years of practice experience as a chartered accountant can suffice as eligibility for a loan for professionals. Ensure you fulfil this criterion before applying to successfully avail the loan.
Rule 3 – Maintain a standard FOIR
FOIR or Fixed Obligations to Income Ratio of a borrower is an essential factor which financial institutions consider before approving a loan. Through the FOIR, lenders determine your loan repayment capability.
It is the ratio between your fixed monthly financial obligations and monthly income. Financial experts suggest maintaining a ratio under 50% to accommodate a loan and its subsequent repayment schedule.
Rule 4 – Decide on repayment tenor
Repayment tenor is instrumental to determine the EMI amount and the total interest payable throughout the loan tenor. While a longer tenor leads to lower EMIs, it also increases the interest amount, known as the total cost of the loan, and vice versa.
You should duly assess your current and prospective financial prospects before applying for a professional loan. Choose repayment terms which you can financially meet while also ensuring you pay less as interest.
Rule 5 – Check interest rates offered by different financial institutions
You should thoroughly research the websites of different financial institutions to ensure you avail the loan at competitive interest rates.
Reputed financial institutions such as Bajaj Finserv offer Loans for Chartered Accountants at affordable interest rates along with various borrower-friendly features.
These loans for professionals are designed as per the suitability and needs of chartered accountants to help them meet their financial obligations conveniently.
You can utilise a CA loan to build your practice at home or set up an independent practice in a designated commercial space. Regardless, you should consider the rules mentioned above before applying for a loan to make a decision tuned with your obligations and financial capability.
You must be logged in to post a comment Login