The business sector has seen a considerable growth and the main contributors for this are the rising number of start-ups in India. But starting something from scratch is not easy. There are a lot of factors that need to be considered and the most important of them all are the finances. One of the downfalls of being your own boss is that there is no steady income.
So how do you manage running a company when you have no money in your pockets to pay your employees? The answer is quite simple: personal loans. Personal loans are the most sought after product as the proceeds from the personal loans can be used in any way that you wish to. Generally, the financial institution or the lender do not monitor how you spend this money. But you need to jump through a lot of hoops before the financial institution or the lender approves your personal loan application. Since you do not have a regular source of income, the financial institution or the lender might be a bit hesitant to approve your personal loan application.
Here are a few tricks that you can do that will lead to the bank approving your loan application:
- Check your CIBIL Score:
The CIBIL score is the most important thing on your loan application. If you have a good CIBIL score then the financial institution or the lender will be more inclined to approve your personal loan application. The CIBIL score ranges from 300 to 900 and it is crucial that you maintain a score above 750 for the financial institution or the lender to instantly apply your personal loan application. If you have a low CIBIL score, start working on improving your CIBIL score a few months before you apply for the loan.
- Clear Your Previous Debts:
If you already have a previous loan or loans then it is advisable that you do not avail another loan. The Equated Monthly Installments (EMIs) that you have to pay on any loan makes up to 40% of your monthly income. Even though the banks take your financial standing into account before deciding your EMI, it is wise that you pay off any other debt that you have so that you can concentrate on servicing the new loan.
- Delay Taking a Loan For at Least First Two Years of the Business:
This is actually very sound advice. The reason behind this is that a lot of businesses give up after they do not succeed within the first two years of going into business. Since you are just starting out and you do not know how the business will turn out, it will be better if you do not take a loan at the very start. Because if your business fails and if you have put up a collateral on your loan, the collateral will be seized if you fail to repay the loan.
- Save Before You Quit:
If you have a stable job and if you want to start something of your own, save some money first. Starting something of your own is not easy and it will take a lot of hard work, time, and commitment and of course finances. Before you decide to quit your full-time job, make sure that you have enough money saved so that you can start running your own business.
One of the important things to remember before you apply for any kind of a loan is that if your loan application gets rejected, it will negatively affect your CIBIL score and will discourage the financial institution and the lender from providing you a loan in the future. You also need to give the decision of availing a loan a good thought since it will affect your finances until you pay off all your debt.