8 Reasons Why Self-Employed People Get Personal Loans
5 min read | 7 months ago
There is no denying that personal loans are helpful options for meeting urgent financial needs. However, salaried borrowers are still the most preferred choice for lenders in this segment. Reports indicate that 29% of salaried borrowers in the country have at least five active accounts for credit, while only 23% of self-employed borrowers have the same. It may be because of the steady income flow of salaried borrowers that helps them get better credit rankings. Yet, self-employed borrowers comprise a large section of the professional/earning class in the country. More lenders are thus coming up with personal loans tailored for them.
On that note, here are the top reasons why self-employed borrowers need personal loans.
Reasons Why Self-Employed People Get Personal Loans
Let us take a close look at eight reasons why self-employed professionals get personal loans.
1. Expansion of Business- This is one of the most crucial reasons why self-employed professionals need personal loans. Funds are often necessary for setting up business locations or offices, scaling inventory, and launching new advertising or branding campaigns.
2. Working Capital Requirements- Self-employed professionals may sometimes struggle to maintain adequate cash flow due to payment delays and other reasons. Hence, they can opt for personal loans to cover day-to-day costs and keep their businesses operating smoothly in tough times.
3. Buying New Equipment- Many self-employed borrowers often need to upgrade or purchase equipment and other tools/software to enhance their business operations. It can be covered with the help of a personal loan.
4. Consolidating Debt- Consider a situation where a self-employed borrower has taken several debts, including small loans at higher interest rates and credit card dues. A personal loan with a better interest rate can help them consolidate all these debts and save on costs in the long run.
5. New Investments- Small businesses often find new investment opportunities that require instant funds. Personal loans may help take advantage of these market opportunities for future profits and growth.
6. Emergency Costs- Self-employed individuals often have irregular income flows that may lead to a cash crunch during emergencies. These situations may include sudden illnesses requiring hospitalization, vehicle or home repairs, etc. Personal loans help fill up funding gaps in these scenarios.
7. Training and Up-Skilling- Many self-employed professionals need personal loans to fund higher education and skill development. This money comes in handy, helping them up-skill and enhance their overall knowledge and competitiveness in their chosen industries. Personal loans can help with certifications, workshops, courses, and training programs.
8. Personal Costs- Whenever there is a cash crunch and urgent personal costs have to be covered, these loans may come in handy. Self-employed professionals can also use these funds to cover higher education costs for their children or pay for family weddings or ceremonies. They may even use the money to indulge their passion for travel or buy a new vehicle.
Conclusion
As can be seen, there are several reasons why self-employed people require personal loans. These funds are a boon for those with irregular cash flows, particularly during emergencies or lean periods for the business. However, applicants should note the terms and conditions of the loan carefully before signing on the dotted line. It is also vital to apply for an optimal amount without borrowing more than one can afford.
FAQs
1. Can I use a personal loan to buy a new vehicle?
Personal loans can be used for any purpose. You can use them to make the down payment for a new vehicle without hassles.
2. Do personal loans require any security?
Personal loans are unsecured forms of credit. You do not have to provide any collateral or security to get them.
About Unity Small Finance Bank
Unity Small Finance Bank is committed to making banking simpler and more accessible for everyone. Our services include Savings Account, NRI account, Current Account, Fixed Deposits, and Personal Loans offering flexible tenures and attractive interest rates. We also offer financing options like MSME Loans and Microfinance to support businesses and underserved communities. Learn more about Unity Small Finance Bank here.
