Personal loans for freelancers: Key things to consider before applying
Securing a personal loan is not too difficult any more with plenty of options to go around. From salaried persons to self-employed, anyone can take a loan for reasons as varied as wedding to home renovation, among others.
But what if someone is a freelancer? Are they eligible to procure a personal loan? And if yes, what documents do they need? Here we give a lowdown on personal loans which can be availed by freelancers.
Freelancer applies for a loan: Points to consider
Income Tax returns (ITR): First and foremost, freelancers must show his/her income through income tax return since they do not have any salary slips to show. The last two or three-year income tax returns indicate the income earned by the freelancer during this period.
Credit score: Getting approval for credit score is a function of credit score. Therefore, it is important to maintain a good credit score. If a freelancer has a credit card, it is vital to pay the bills on time.
Only for urgency: Since personal loan carries a high rate of interest, it is recommended to take a loan only when it is essential.
Scenarios where a freelancer may have to raise a personal loan
When payments are delayed: Oftentimes it happens that freelancers receive payment for their work long after they deliver the project. In such a scenario, they need a working capital to run their operations. These requirements can be met by raising personal loans.
For equipment or gadgets: When a freelancer needs equipment such as a computer or a gadget, s/he may take a personal loan to buy the same immediately. Since this is a long-term investment, one can take a loan to buy it and repay after earning with the use of those same gadgets.
To pay to the staff amid slower turnaround: Another reason could be to pay administrative staff or clerks during a lean period when receipts are few and far between. Although it is expected from a freelancer to keep an emergency reserve for the rainy day or month, it may fall short.
Disclaimer: Mint has a tie-up with fintechs for providing credit, you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit score. Mint does not promote or encourage taking credit as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.
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