Know the Difference between Loans for Salaried Professionals and Loans for Self Employed In Less than 5 Minutes

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Personal Loans are unsecured credit instruments that salaried employees and self-employed professionals can borrow for various big-ticket expenses. There are both secured and unsecured Personal Loans. Secured Loans are used by people that can mortgage any of their assets with the loan provider. You can go for an unsecured Personal Loan when you do not want to offer any collateral. 

With a hassle-free application process and minimal documentation requirements, the borrowers can use unsecured loans for planned or unplanned expenses like a wedding, medical emergency, travel, home renovation or education. 

Both banks and reputed NBFCs provide Personal Loans for salaried and self-employed applicants when they fulfil the minimum eligibility criteria. The eligibility criteria and documentation requirements vary depending on the applicants’ profession, income source, stability, and other factors. Often, eligibility requirements, processing time and collateral requirements are higher for self-employed professionals than salaried employees due to the uncertain nature of their income source. As a result, self-employed individuals may have to pay a higher interest rate on Personal Loans. 

Eligibility criteria may differ between loan providers, but financial discipline, past repayment record, and good credit history are factors that NBFCs closely look into. Let us understand the critical differences between loans for salaried employees and self-employed professionals.

How do Personal Loans Work for Salaried and Self-Employed?

Salaried employees drawing steady income each month, can obtain a Personal Loan for salaried without any hassles. Whether they need funds to finance a wedding, home renovation, vacation, education, or medical emergency, they can fulfill their immediate financial requirements with a Personal Loan. Their work experience, monthly salary, and working organization are crucial factors that affect a salaried individual’s loan eligibility. Loan providers prefer salaried employees over self-employed professionals because of their job security and fixed income. The higher the salary, the better their chances of obtaining a bigger loan amount.

Small and medium-sized entrepreneurs, practicing doctors, chartered accountants, and other professionals can avail of a Personal Loan under the category of self-employed professionals. As independent professionals, they require funds to expand their business, restock inventory, or even fund a business trip or personal holiday. As most NBFCs prefer salaried employees for their fixed income, self-employed professionals can go for secured loans by mortgaging an asset and relevant Personal Loan documents. 

Differences in Features and Benefits

Collateral Requirements: Loan companies do not ask for any collateral, security, or guarantor while offering Personal Loans to salaried. They may ask self-employed individuals for collateral to establish trust.

Loan Process: The loan process is much faster and hassle-free for salaried employees than for self-employed professionals. The minimal loan documentation makes it simpler to avail of a loan. Self-employed professionals may need to provide additional documents to prove their income source and stability.

Interest Rates: Salaried applicants get better interest rates on Personal Loans than self-employed ones because of their income stability. Self-employed professionals are considered more likely to miss EMIs due to uncertainty, encouraging loan companies to charge a higher interest rate.

Loan Approval: With a shorter loan process and limited Personal Loan documents required, approval comes much faster for salaried employees than self-employed professionals.

Differences in the Eligibility Criteria

Eligibility criteria vary between providers but they differ for salaried and self-employed applicants as well. Let’s understand their differences. 

Age Requirements: Although minimum age requirements are the same for applicants in both categories, the maximum age condition is higher for self-employed than salaried. Since most salaried employees retire and their income source seizes by 58-60 years of age, they must repay their loan before retirement. On the other hand, self-employed professionals have a more lenient maximum age restriction as they can work as long as they want.

Income: Loan providers have a minimum salary requirement for salaried employees while they check the self-employed professional’s finances and turnover to determine eligibility.

Employment or Profession: Salaried employees should have a stable job in a government department or private limited company to qualify for Personal Loans for salaried. On the contrary, NBFCs check a self-employed professional’s nature of profession, establishment, and reputation before offering them a Personal Loan.

Experience: Salaried employees must be working in the current job for at least six months and have a total work experience of a longer time than a year to qualify for a Personal Loan. However, self-employed professionals must have been operating their businesses for a good number of years to obtain a Personal Loan.

Documentation Requirements: Furnishing the loan required document is more straightforward for salaried than self-employed applicants. Salaried employees can quickly prove their eligibility by providing their income, residence, and identity proof. These simply include their Aadhaar card, PAN card, voter ID card, driving license, passport, salary slips, and Form 16. Self-employed professionals might have to provide more extensive documents to prove their loan eligibility, including proof of office address, proof of ownership, profit and loss account, ITR, bank statements, GST and utility bills.

Credit Score: Financial institutions provide Personal Loans to salaried employees and self-employed professionals if they meet the eligibility criteria. However, for both, a good credit score goes a long way in ensuring their loan application gets approved faster irrespective of their employment type. While age, income, job stability, and work experience are crucial in attracting loan approvals, NBFCs factor in an applicant’s credit history before sanctioning their loan. 


While most eligibility conditions and documentation requirements vary slightly for salaried employees and self-employed professionals, the latter might need to provide a few additional documents and a higher credit score to qualify. Remember, a steady income stream along with a consistent repayment history, ensures quick Personal Loan approval and disbursal without hassle. So, before applying for a Personal Loan for salaried or self-employed, check the eligibility requirements and fulfil them to get the best deal. Evaluate the loan requirement and apply for an appropriate loan amount to get faster approval at the lowest interest rates.

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