How do professional loans score over regular personal loans?
A professional loan is an unsecured loan given to a professionally qualified individual providing professional services either as an individual or as a business. Typically, professionals such as doctors, chartered accountants and company secretaries are eligible for professional loans. These loans are given to professionals to meet their personal or professional needs. But if you are a professional, should you opt for this type of loan? Let us take a look.
Eligibility and benefits: These loans require minimal documentation, offer the most competitive interest rate, have minimal charges such as processing fees and have no hidden charges.
Manish Chaudhari, head digital and corporate alliance, Poonawalla Fincorp, said, “The eligibility for availing a professional loan is based on the earnings and existing obligations and also takes into account the previous credit history of the customer.”
He further said, “Some features that are unique to these loans are that they come with the option of making part payment and no pre-payment charges being levied in case the customer wants to pre-pay from his/her own sources. This makes it a more affordable and a smarter choice as customers can optimize their interest outflow.”
Apart from this, the loan does not require any physical signing of documents or handing over of post-dated cheques. The process is done through an online e-signing of the loan agreement and e-NACH (EMI repayment instrument), making it apt in the current pandemic situation. There is a top-up available in the future if the customer wants to take an additional loan amount, Chaudhari added.
However, you must know that the eligibility criteria will differ from bank to bank or lender to lender.
Therefore, you should always check whether you meet the eligibility criteria before applying for a professional loan.
Documents required: The documents required to avail these loans are very basic such as professional qualification proof, know your customer (KYC) documents, bank statements, and employment or business proof. With these documents, the application can be submitted online for instant approval and disbursement of the loan.
A professional can also avail of the loan offline by visiting the nearest branch of the lender from whom he/she wishes to avail the loan.
Comparison: Professional loans score over personal loans as they come with benefits such as better pricing, flexible tenure options, lower processing fees, higher loan amounts and various customized offerings. These loans are tailor-made, keeping in mind the requirements of professionals.
Chaudhari said, “Professional loans generally are priced better than personal loans and start as low as 9.99% per annum for salaried and self-employed professionals. For instance, if one takes a ₹10 lakh professional loan at 9.99% for 36 months vis-à-vis a personal loan at 12%. A professional loan can help save at least ₹34,000 in interest outflow only across the loan tenure. Suppose the professional loan provides features like part payment with no charges and full pre-prepayment with no additional charges. In that case, the interest outflow can further be reduced and optimized based on the business cash flows.”
The overall average ticket size for availing professional loans typically ranges between ₹10 lakh and ₹12 lakh.
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