Professional loans for self-employed: Know all details

• Follow

We all know what personal loan is and its significance. There is also something called professional loan which is specially designed for professionals like doctors, chartered accountants, lawyers and other self-employed professionals. These have a few advantages over personal loans. Like personal loans, professional loans are also unsecured loans. Experts say these loans are designed for the purpose of expansion, up-gradation or for any other professional requirements.

Professional loan vs personal loan

Both loans are unsecured in nature and attract higher rates of interest than home or car loan.

But professional loan has some advantages over personal loan. That is why professional loan are more attractive to professionals than personal loans, said Saibal Biswas, a personal finance expert from Kolkata.

He also said that some banks and NBFCs also offer attractive interest rates and multiple facilities in professional loan.

Advantages of professional loan

One of the main advantages of professional loans is that banks and financial institutions charge low interest rates than that in case of personal loans. Professional loans have lower interest rates – about 2% compared to personal loan, said Nilotpal Banerjee, a Kolkata-based personal finance expert.

Besides, interest of professional loan often depends upon the utilisation amount not on the full loan amount. If one takes Rs 10 lakh as professional loan but uses only Rs 6 lakh, one has to pay interest on this amount, not on the whole amount, Biswas told Money9.

The key benefit of a professional loan is the fact that it does not require any collateral with the lender as security. Additionally, such a product can be availed digitally without the need to physically visit the branches of the lender, added Banerjee.

Limit and interest rate

Like personal loan there is some limit on professional loans. But professional loan limits are higher than personal loans. Generally, a personal loan amount varies between Rs 25,000 and Rs 15 lakh or above.

But in professional loan the limit ranges between Rs 1 lakh and Rs 50 lakh. It can also go up higher. The interest rate of professional loan generally starts from 10% and goes up to 15% or above.

List of lenders

Among the leading public sector banks only State Bank of India offers professional loans. Private players such as HDFC bank, ICICI Bank, Axis Bank, Kotak Mahindra Bank also offer this loan. NBFCs such as Bajaj Finserv also offer professional loan.

Points to remember

“In the past, professional loans required certain physical/tangible assets which are of monetary value with the lender to avail loans for professional’s requirements. But now no collateral is needed to take these loans,” Nilotpal Banerjee told Money9.

The EMI for professional loans might be high. Professionals should keep these things in mind and judge the repayment capacity before proceeding.