Loan Basics. Something special for professionals

Are you a professional like a doctor or an architect, looking for options to raise funds for some upcoming expenses?

There are special personal loan products exclusively designed for professionals — professional loans. Both banks and non-banking financial companies (NBFCs) offer personal loans for professionals under this category. They fall under the unsecured loans — you do not have to provide any collateral unlike for other business loans.

Eligibility and documents Banks and NBFCs classify doctors, chartered accountants, architects and company secretaries as professionals.

They can either be self-employed or salaried. HDFC Bank needs minimum four years post-qualification experience for doctors and chartered accountants.

If you are an architect or a company secretary, then a five-year minimum post-qualification experience is required. The minimum annual income should be ₹1 lakh. If you are self-employed, the business should be making profit in the last two years. The income, balance sheet and profit and loss account statements have to be produced along with other documents. In the case of salaried professionals, salary slips and bank account statements for the last three to six months have to be submitted.

Your degree certificate will be the most important document required to avail this loan.

In the absence of this document, you may not be denied a loan, but you will be considered as a normal individual and you make have to opt for a personal loan instead. The other process involves the normal know-your-customer (KYC) documents like submitting the identity proof, address proof, and so on.

Lower rates and other fee A lower interest rate for professional loans than personal loan is a major advantage of this product.

For instance, in HDFC Bank, 14.5-15.25 per cent is the interest rate range charged for professionals. Whereas for a normal personal loan, the rate begins at 15.75 per cent and goes up to 20 per cent. Bajaj Finserve charges a processing fee of 2 per cent of the loan amount and ₹1,999 as convenience fee for online professional loans.

The loan tenor ranges from one to five years and the loan amount can go up to ₹30 lakh or even higher, depending on your current income and repaying capacity. But if you get a general personal loan, your loan amount may be capped at ₹20-₹25 lakh at the maximum.

According to experts, banks consider professionals as a good category to lend to; so getting a professional loan is relatively easy.

Advantage professionals Rishi Mehra, co-founder, Deal4loans.com says: “The default ratio is very less in this segment; so professionals can get the loan at a lower rate with higher loan amounts and easier processing facilities.”

Since there is no restriction on the end use of this loan amount, professionals can opt for this product even when they want funds for business purposes.

Professional loans score over business loans on several counts. First and foremost is interest rates. Business loans come at a higher rate of interest. For instance, HDFC Bank charges 16.25-19.75 per cent for business loan, which is much higher than that charged for professional loans.

Producing just a degree certificate as proof will ease the documentation processing for taking a professional loan. But in the case of the business loan, the documentation pertaining to the business will undergo tighter scrutiny before the loan is sanctioned.

Also, the eligibility criteria will involve your business turnover, which will have to meet the minimum slab limit. That is, a minimum turnover of ₹40 lakh is required to take a business loan from HDFC Bank.

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