If your dream job is to be your own boss or working from home as a freelancer, you might have to face some resistance on the way of getting a loan at times of need. Your variable salary might affect the approval of your personal loan. So in order to eradicate this problem and persuade the financial institutions to lend you funds in form of a personal loan, you need to follow a procedure.
Let’s look at the process of approaching a bank for loan when you are a freelancer.
Build a decent credit score
Well, that’s an important factor in every case, but it becomes essential if you are a freelancer. You might have to work harder In order to improve your chances of getting a loan by building and maintaining a good credit behaviour for a long term. Keep a close eye at your credit reports, pay your dues on time, and never miss out on paying a monthly instalment and you can ease your way into getting a loan approved. It is also suggested that you do not hold multiple cards and utilise less than 30% of your credit limit in order to make your loan application tidy and acceptable. You can also start with cancelling the unused credit lines to improve your chances of getting a loan approved.
Make EPF Contributions and Pay Your Taxes
When a bank looks at your loan application, one of the things it focuses is your repayment capacity and your credibility. By paying your taxes on time, you can boost your credibility by a significant amount. Your regularly done taxes can serve as your uniform income proof. Also making EPF contributions does the same for you and convinces the money lending institution that you have a regular and consistent income flow. Your PF can also help you pay off the loan if you are a 50 year old or older freelancer.
Target the Right Banks and Institutions
When you are in need of urgent funds, first approach the banks which you have had a past relationship with. You have more chances to get a loan from your savings or current account holding bank. If you are an existing customer of the bank, the bank sees you as a less risky applicant and your chances of getting a loan can rise. But you don’t have such a relationship with any bank or financial institution, it is recommended that you explore all banks offering a loan to freelancers and compare the loan amount and the interest rates offered.
Opt for Guarantor Loans
You can also take help of a close family member or a close friend to obtain the funds. Someone who can vouch for you during your application can help increase your chances of getting the funds you require.
Go for the Licensed Money Lenders
If your loan requests are not entertained by any bank or financial institution, it doesn’t mean that it’s the end of the road for you. You can approach licensed money lenders with your request for a loan. These money lenders and independent brokers can provide you with the funds of your requirement. But before opting for this as a last resort, you should also take in account that the interest rates charged by these lenders may be higher than market rates.
Make Yourself Appealing
Last, but one of the most important things is that you make yourself and your application presentable with all your savings and unit trusts details mentioned along with your application. Always try not to miss out on any detail that can be useful for the loan approval like any additional income or investments. Also if you have a small sized firm or business, get it registered to enhance the chances of approval.
Finding a personal loan of your choice can be tricky if you are a freelancer, but if you follow this basic procedure, you can find the package of your choice Always remember to strengthen your financial roots before approaching a bank and utilise your long term relationships with banks.