Personal Loan for Proprietorship/Partnership Employee

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Personal loan for proprietorship and partnership employee. If you look into the classification, the landscape will be seen even more diverse with private/public limited companies, as well as proprietorship and partnership firms. While there’s no problem for lenders giving out personal loans to individuals working in private or public limited companies if they meet the necessary eligibility criteria, they hesitate doing so for those working in proprietorship or partnership firms.

If someone works in a proprietor firm then it becomes a challenge to get finance. This is because lender also checks the credibility of the company applicant works for. Since in a proprietorship company ownership is held by a single person, so risks such as sustainability, turnover etc. always exists. For e.g. if anything unfortunate happens to the proprietor, then the whole business may come to standstill and there will be uncertainty in the job of employees i.e. company may shut down or workers will not get salary and so on. And in such cases, if any employee is granted a personal loan then repayment will become difficult due to no income.

5 ways a Proprietorship/Partnership Employee can get a Personal Loan

1. High Income

If the applicant works in a proprietor run company but earns good income which is higher than required by the lender then he/she has higher chance of finance approval. In addition to this, if the company is into business for a long time and profitable too then also the chances of getting personal loan increase. Salary slip and bank statement as required by the lender will help to prove the income.

2. Private Money Lenders

Loans from private lenders work just like loans from banks or credit unions. This option is mentioned but should be avoided as much as possible. Because they take control of your assets such as property or gold or any other till the complete repayment is done.  You receive funding to buy a property, make a purchase, consolidate debt, and make home improvements or any number of other expenses. Then, you pay the amount you borrowed back in installments, with interest. Negative sides of getting personal loan from them are that interest rate charged is very high and recovery process is very bad. Of course there are few benefits such as no credit history check, quick disbursal of money, flexi-repayment option, etc.

3. Loan against Securities

Employee from proprietorship firm can also get personal loan by keeping LIC policy, gold, mutual fund, ETF, and savings bonds as a security with the bank. Loan against Securities or LAS is a loan availed against your pledged securities as collateral with a bank. So, why liquidate? Instead, get a Loan against Securities to fulfill all your financial needs. Leverage your investments to raise quick funds via HDFC Bank’s loan against securities.  Some may have a cap on the amount while others may lend money depending on the market value of the pledged security.

4. Loan against Fixed Deposit

If the borrower has FD account with the bank then he can get personal loan against this FD at a lower interest rate with minimal documentation. Most importantly lender won’t check the employer’s credibility. Get a Loan against Fixed Deposit from Axis Bank for your cash requirements without having to liquidate your fixed deposits. Avail upto 85% of the value of your fixed deposit without losing out on the interest and paying a penalty for breaking the fixed deposit. This type of a loan is secured as the FD is pledged with the bank. And applicant will get loan amount which is 80% – 90% of the FD amount.

5. Loan against Shares

Loans against shares are monetary loans that are provided against listed securities like bonds, shares, insurance policies or bonds. Loan against share is offered against listed securities. Investors can borrow funds against existing investment portfolios to meet investment and liquidity requirements. The money that the borrower has invested in can get him a loan. Most often people invest in shared as it is a popular method of short and long term investment. The securities acceptable differ from lender to lender and the lenders usually have a list of securities that they choose from. It is simply to ensure that the lender will not incur loss.

Condition to get a Personal Loan

Yes, there are a few conditions that employees of proprietorship and partnership firms need to meet. Check out those conditions below.

  • Employees must have a job stability of at least 2 years
  • They must have their own home
  • The minimum net monthly income should be ₹25,000
  • Rest all conditions, such as a good credit score, are the same that you find at other lenders.

Documents Required to Obtain Personal Loan

  • Identity Proof – PAN Card/Voter ID/Passport/Driving License/Aadhaar
  • Residence Proof – Voter ID/Passport/Driving License/Aadhaar
  • Home Ownership Proof – Home Purchase Agreement Papers, Electricity Bill in the Borrower’s Name
  • Office Residence Proof – GST/Sales Tax/VAT Registration
  • Income Proof – Last 3 Months’ Salary Slips/Last 6 Months’ Bank Statement/ Latest Salary Certificate

How much Loan can you get?

It will depend mostly on your income and repayment potential. The proposed Equated Monthly Installment (EMI) must stay within 50% of your in-hand income. As you could see above the minimum salary required is ₹25,000, so your loan amount should be such that the EMI does not go beyond ₹12,500 (50% of 25,000). Even if they agree to lend beyond that threshold, it will be better to use a bit of your savings to ensure the EMI remains within the 50% bracket. The reason being the repayment capability will weaken with the increase in the EMI.