Stay professional with Professional Loans

Being a professional in this world is hard, with one expected to toe certain standard guidelines and regulations, aiming to fulfill the duties of a professional with utmost respect and diligence. Most of the world looks up to professionals, with their jobs highly coveted, demanding attention from others. It is, however, not easy to be a professional, with it requiring a high level of skill and commitment, on both the professional and business front, with finances playing a key role in the overall development of a professional.

What are professional loans?

A professional, by definition, is someone who undertakes a duty/job which is the outcome of specialized education/training. Some of the most popular professions in the world are related to medicine (doctors), engineering, architecture, research (scientists), sports, etc. These are activities which involve a tremendous amount of effort and hard work, culminating in years of training and studying. It is this level of expertise which makes professionals sought after, the world over.

Being a professional isn’t easy, with most professional training requiring one to spend a sizable amount of money. Recouping this money can take time, with a number of professionals aiming to establish their own venture to reduce this time and make a bigger name for themselves. A professional loan, as the name implies, is a loan which can be availed only by professionals. This loan amount can be utilized towards the development/skill enhancement or establishing a new venture to boost their profession. This loan is available only to a few select categories, making it a specialized product.

Where can one get a professional loan from?

A professional loan in India can be availed through banks and NBFCs.  While almost all banks offer this product, not all NBFCs provide it. Some of the popular products can be availed from Oriental Bank, HDFC Bank, SBI etc.

Who is eligible to take a professional loan?

Professional loans, by definition limit the eligibility to a certain section of the population. This loan can be availed by individuals who are involved in a profession of some sort. One could either be employed with an organisation, either practicing a profession or could be self-employed, with the major criteria being the kind of work one does. Some of the most popular professions which qualify for this loan include doctors (surgeons, general physicians, dietitians, orthopedic, etc.), engineers, architects, lawyers, TV/radio personality, journalist, etc.

While this forms the basic criteria to be eligible, availing the actual loan could mean that one has to fulfil other aspects, primarily related to the following points.

  • Age – An applicant should be within a specific age group, typically ranging between 22 and 55 years.
  • Experience – A borrower should have sufficient experience in a particular field/profession, with most lenders demanding a minimum of 2 years’ experience.
  • Income – A professional who intends to avail this loan should have a sufficient income, ensuring that he/she is in a position to repay the loan.

Individual banks/NBFCs might have certain additional criteria which a borrower is expected to satisfy in order to be eligible for a professional loan.

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Features of professional loans

Professional loans come with a host of attractive features, some of which are highlighted below.

  • High quantum – Individuals are eligible to loans worth up to Rs. 50 lakhs (and more), with banks and NBFCs willing to provide this high amount on the back of their work experience and growth perspective. One can typically avail a loan which is 10-15 times their net income.
  • Guarantors – Most lenders do not insist on having a guarantor before sanctioning a loan. This highlights their trust in borrowers from a particular profession, making it easy for an individual to avail a loan.
  • Multiple professions – A professional loan is not limited to individuals belonging to a certain profession, with most banks providing this loan to members who belong to different professions, eliminating discrimination among different types of work.
  • Security – Most banks and NBFCs do not insist on collateral or security in order to sanction a professional loan.
  • Prepayment – Prepayment of a professional loan is possible in most cases, with lenders typically not enforcing any fine for this prepayment. This enables borrowers to repay the loan amount whenever they have additional funds.
  • Interest – These loans can be availed at competitive interest rates, which typically range between 10 and 14% per annum (can vary from bank to bank). These make them more attractive than personal loans, which is a major reason for their popularity.
  • Tenure – A professional loan can be availed with a flexible repayment tenure, typically ranging between 1 to 6 years. This provides a borrower sufficient time to repay the loan through planned EMIs.
  • Quick processing – Most lenders are quick to process a professional loan application, with it possible for an applicant to receive the loan in a very short period.
  • Simple eligibility – Individuals need to satisfy a few basic criteria in order to be eligible for this loan.
  • Low processing fee – A professional loan typically attracts a lower processing fee compared to other loans. This can range between 0.5 and 1% of the loan amount, depending on the lender.

Documents required to avail a professional loan

While it is easy to avail a professional loan, eligible applicants will need to submit the following documents before the loan is sanctioned.

  • Proof of qualification – This is the highest degree achieved by an applicant (MS, MD, etc.)
  • Valid government approved ID proof – PAN card, DL, Passport, etc.
  • Valid proof of residence – PAN card, utility bill, Voter Id, DL, passport, etc.
  • Latest salary slip
  • Proof of tax payment – This should be the latest income tax return filed by an applicant
  • Professional certificate – Individuals practicing a particular profession could be required to submit proof of the same. This could be a medical certificate, BAR license, etc.

A bank/NBFC could ask for any additional document it feels is necessary to consider a particular application.

Interest rates on a professional loan

Professional loans come at extremely competitive interest rates, which are generally lower than the interest rates charged on a personal loan. The rates typically range between 10 and 14% per annum, depending on the lender, making a professional loan an ideal source of funds.

 

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Right time to apply for a Personal Loan

Personal Loan is the loan the easiest loan that a borrower can take. The loan amount can be used for any purpose and there is no need for you to submit any collateral. Personal Loan is also called as Unsecured Loan. You can borrow more that you can with a credit card. The repayment amount is fixed each month and you can plan your finances in a better way. The interest rate is fixed and you can choose the loan tenure. You can use Personal Loan to consolidate your debts and you can get it down to one monthly payment instead of repaying debts separately. This however means that you will be extending the length of the loan.

Personal Loans come in handy as you immediately get the amount you require and the banks don’t bother with how you utilize the loan amount. But, the interest rate on the loan is higher when compared to other form of borrowing if you wish to borrow a smaller amount. As the interest rate reduce when you take a bigger loan, you will be tempted to take a bigger loan when you do not need one. The interest is usually higher as you are not submitting any collateral.

What is the right time to take a Personal Loan?

When you are taking a Personal Loan you have to compare the rates and other factors. But, the question is when you must opt for a Personal Loan. Personal Loan can be taken for the following purposes:

  • Repaying another loan that has a higher interest rate:

It is not always a wise option to take another to repay another loan, but you can do so when you are getting charged a higher interest and it is making it difficult for you to handle your debt. If you think taking a new Personal Loan will help you save a lot of interest, then go for it. When you are done with repaying the Personal Loan, you will have a good repayment history as you would’ve cleared the old and the new loan on time and this will boost your credit score.

  • Consolidate debt:

If you have taken a lot of debt, or you have too many credit cards that are overdue, you can take a Personal Loan and pay off all your debts in one shot and then only worry about paying one interest and one repayment. This makes it easier for you to remember to repay your debt and there is a low chance that you will miss out on any payment. There won’t be varying dates to repay the debt.

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  • To pay for your tuition for higher education:

If you are at a point in life where you think you want to study further and are restricted by your finances, you can take a Personal Loan to take care of the tuition. You will just have to concentrate on your studies.

When is the wrong time to get a Personal Loan?

Though a Personal Loan is given out easily to people and there is not condition on how the amount is to be spent, you must not get used to that idea and take a loan for silly things. You must refrain from taking a Personal Loan for the following reasons:

  • For buying a consumer product:

Though you might be tempted to just take a loan and buy a new phone that is launched in the market, you must think of an alternate way to buy it. It can be buying a phone or a TV or any other product. You can save each month and then upgrade your phone or buy a new TV, etc. This way you will save on paying interest as it can be easily avoided.

  • For meeting emergency financial needs:

When you are in a tight spot and are panicking about everything, it is not wise to decide to take a loan. Never take a hasty decision regarding your financial matters. Do not jump in and take a loan just to get out of the current situation. You can dig into your savings or your fixed deposits to come clear.

  • For travelling:

A lot of people want to go to exotic places to vacation and holiday. But, the only thing stopping is the finances. If you are considering taking a Personal Loan to go splurge on a trip overseas, you might as well stop consider travelling. What is the point of spending on a holiday and relaxing when you have to get back and deal with a huge debt? The whole purpose of a holiday is lost.

Personal Loan offers you help to achieve financial freedom and you must use them in the right way to enjoy that financial freedom. You must consider cutting costs and making some sacrifices to make your dreams of owning a new phone or going to an exotic place for vacation come true.