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Research the lender and choose the right loan
Don’t ignore your credit score or take multiple debts
Meet the eligibility criteria and submit all documents
Know the terms and conditions and fees of the loan
Businesses need additional capital from time-to-time, and for a self-employed or a consultant engineer, cash flow can be inconsistent. During such times, a professional loan for engineers can help your business through unforeseen cash-strapped circumstances. This customised loan can also be taken when you plan to expand your business and needs funds to do so.
A professional loan for engineers can be availed through various lenders with ease, but you need to be careful to avoid certain mistakes that can be detrimental to your application.
Here are some common mistakes to watch out for.
Before applying for a loan, you must check your creditworthiness. After all, your credit score is the first thing that a lender will evaluate. This is especially true for a loan for engineers, as it is unsecured. So, this is the only way for a lender to judge your ability to repay the loan. Your credit score is a record of how financially responsible you have been with regards to debt repayment. So, rather than ignoring it, make the effort to check it by visiting the CIBIL website.
If you find your score low (below 600), take the time to improve it. You can do so by repaying existing debt, making timely EMI payments, not making too many loan application and decreasing the use of your credit card.
In your eagerness to get a loan quickly, you may skip exploring various types of loans. As a result, you may find yourself saddled with a loan that isn’t as flexible as you would like it to be. More importantly, choosing the wrong kind of loan can work out to be expensive. But, when you opt for a loan that caters to all your needs and provides features like a flexi loan facility, it will help you keep costs to a minimum while catering to unpredictable financial needs. Specialised loans such as loans for engineers also offer nominal interest rates as compared to regular loans. So, choosing the right loan goes a long way in ensuring that you make a financially wise decision.
Every lender has different application requirements that need to be complied with. Most often, you will need to meet the following requirements:
• You must be self-employed or must be a consultant engineer
• Self-employed engineers must have at least three years of work experience
• You should have graduated at least five years ago
• You must be aged between 26 and 65 years
If you check whether you meet the eligibility criteria right at the start, you will be able to ascertain whether or not you are a good candidate for a loan. Ignoring this step while applying for a loan may lead to a rejection later on and even bring down your credit score.
Additional Read: How Can Engineers Temporarily Increase Their Manufacturing Capacity
If you don’t submit all the required documentation for the loan, you may not get approval. This also holds true for when you submit incorrect documentation. With most lenders, the application form can be submitted online, but before you do so, gather all your documents. Generally, the following documents are required:
• Completed application form
• Photographs (of all applicants, in case of more than one applicant)
• KYC documents (of all applicants, in case of more than one applicant)
• Business vintage of three years
• Certificate of practice as a business proof
• Details of your engineering degree
Before finalising a loan, be sure to read and understand the terms and conditions of the loan. In case you find it difficult to understand legal jargon, get help from a lawyer to understand what the document states. Look out for conditions that levy penalties on prepayment and foreclosure. It is in your best interests to opt for a loan that doesn’t levy these charges or has low charges. Also, studying the fine print will give you necessary information such as what happens in case you miss an EMI payment. On the whole, you must ensure that the loan document’s wordings reflect the information that you have gotten from the lender thus far.
You could also take an Engineer Loan to consolidate all your existing debts into one single loan and get a better interest rate.
Additional Read: How To Maximise The Value Of Your Company With An Engineer Loan
Multiple loans can seem like an easy way to keep your business afloat, but it is detrimental to your financial health. When you have several loans, it brings down your credit score. This not only makes it difficult for you to get a loan, but it also lowers your chances of getting an affordable rate of interest on your loan. Besides, it adds to your financial obligations. In the event that you borrow more than you can repay, the risk of defaulting on payments also increases.
In cases where there is a pressing and urgent need for finance, you might consider borrowing from the very first lender you come across. But, this isn’t the best way to approach a loan. This can leave you with a loan that doesn’t match your requirements and is expensive in the long run. So, rather than settling for the first lender, review and examine several lenders and compare them in terms of interest rates, service, terms and benefits. This will ensure that you get the best deal.
Planning repayment of the loan in advance makes it much lighter on your pocket. You can do this by investing in a liquid asset that can be resold, or setting up a savings account, cash reserve or a fixed deposit. This ensures that some amount of money is set aside to repay the loan as the tenor progresses. You can also finance the payment of EMIs partially through your income, and partially from cash reserves.
Ensuring that you do not make these common mistakes will help you get the most suitable loan for your business. In your hunt for the right financing, consider the specially designed Loan for Engineers offered by Bajaj Finserv.
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