Key Differences between Instant Cash Loans and Professional Loans

Key Differences between Instant Cash Loans and Professional Loans

Professional loan is a type of personal loan that can be availed by professionals such as journalists, accountants, solicitors, engineers, dentists, management consultants, architects and surveyors, etc. who master in their skills and qualified for practicing the respective trade. One can avail this loan in India for the needs related to the business like construction, equipment purchase, renovating premises, working capital, business premises etc.

The loan is meant for helping the self-employed professional for improving or increasing his/her trade and overcoming liquidity crunch at the time of purchasing any equipment or investing in the business. This loan is offered mainly by government banks of India but few private banks also provide this loan.

How is a Professional Loan Different than a Personal Loan?

Though a personal loan is available for self-employed and professionals, it is targeted primarily for salaried people. A professional loan on the other hand is for a specific profession and specific purpose. An instant cash loan on the other hand is multipurpose in nature. One can use the funds from this loan for any expenses. It does not have any end restriction on the usage of the loan amount. Under a traditional personal loan, salaried people can borrow from Rs. 1 lakh, while an instant loan is between Rs. 10,000 and Rs. 75,000.

This borrowing option works the best for emergency and small expenses. The funds are disbursed to the borrower’s account within a matter of 2 hours to 24 hours. However, a professional loan can take longer to reach the bank account of the applicant. Moreover, the documentation is complicated compared to instant cash loan documentation. Thus, the approval and disbursal time could be longer than 24 hours.

Eligibility needed to avail Professional Loans: 

Below-given is a list of eligibility norms for professional loans in India:

  • The applicants who are already doing their respective trades or different profession novices with central or state legislations issued licence.
  • Association or group of people who are indulged in a profession that each member of the group has licence and is qualified duly for practicing the profession.
  • Professional certificate copy which denoted that they are practicing the profession.
  • The Professionals include people who have a degree/ diploma and are qualified enough or have the skills of practicing professions like, chartered accountants, lawyers, management consultants, chartered engineers, journalists, software engineers etc.
  • Individuals (single or joint), proprietorship, partnership firms and companies are eligible for this loan.
  • The applicants who are aged between 18 to 65 years are eligible to apply for these loans. 

Eligibility for an Instant Cash Loan

Below-given is a list of eligibility norms for instant loans in India:

  • Agee of the Applicant

The applicant must be at least 23 years to apply for this loan. This is because the lender wishes the applicant to have some amount of work experience, and probably a credit history to rely on. As this type of funding is for salaried individuals, also unsecured in nature, some good amount of work experience is necessary.

  • Type of Employment

As discussed, the applicant must be a salaried person. Professionals, self-employed and businesspersons can also for other secured or unsecured loans as per their requirement and eligibility.

 

  • Documents Required

The person applying for an instant cash loan needs to submit government-recognized address proof and age proof. Income proof is also needed but no ITR has to be submitted with the loan application form. Recent passport-sized photographs and PAN cards are mandatory.

  • Employment Tenure

There are no criteria for employment or work experience, but as discussed above, some amount of work experience is required. Thus, the lender expects the borrower to submit income proof such as a bank statement or salary account or recent salary slips. The income proof should be of at least 2 to 3 months.

  • Income

The net monthly salary of the applicant should be at least Rs. 25,000. The salary should credit in the applicant’s bank account. Cash salary is not acceptable to provide funds.

  • Repayment Capacity

The applicant must have a good repayment capacity to get the desired loan amount. The person must retain at least 35% to 40% of the income as disposable.

  • Credit Score

Though credit check is not mandatory, the financial institution may pull out the borrower’s credit report to note the repayment track record. The expected CIBIL score of 600+ is desired by the lender to provide a loan. However, in genuine cases, the lender may accept a lower credit score.

Documentation needed to apply for Professional Loans: 

  • Copies of Membership certificate issued by the concerned professional authorities to the individuals or partners.
  • Copies of Firm registration certificate to register with the professional authorities applicable, besides other certificates as set forth by the loaning institution or bank.
  • Documents or papers which help in having the idea of the borrower’s capacity like income and expenditure statements of three fiscal years, tax return copies /assessment order copies, balance sheet statements of the individual, firm, guarantors or partners etc.
  • Utility bill (recent) that shows borrower’s full name and address, or another identity proof.

Other Details of Professional Loans:

  • Hypothecation of bought assets or premises’ mortgage acknowledged as main security.
  • 50% of the amount of the loan as the collateral security with a person as guarantor, preferably applicant’s spouse is needed according to the documents of the loan. 
  • There may not be needed collateral security for premise acquiring needs. In case needed, the loaning authority will accept properties that are immovable or equipment of office.
  • A few collateral securities which are accepted are building and land,   NSC /KVP / LIC plans, bank deposits etc. subject to lending authority’s acceptance.
  • The lender may require a personal guarantee from family/ title holders/friends/ partners of the collateral securities.
  • If the loan is taken for auto purchase or the relating usage, then the terms will usually be the same as they are for the auto loans.
  • The maximum duration in which the loan can be repaid is usually sixty months, however duration of 84 months or more is also offered by some banks. The duration includes /excludes moratorium up to six months 
  • Usually there isn’t any penalty charged on the prepayment of these loans.
  • One can cover travel expenses related to business like airfare, hotel boarding, seminar charges etc. through these loans.
  • Equipment that are self-assembled like computers aren’t usually eligible for finance.
  • The payment may be directly made to the suppliers/dealers if required. Also the amount may get disbursed in instalments once the borrower verifies the amount’s end use.

To Conclude

Professional loans are for people working for specific professions. Instant cash loans are multipurpose in nature and for salaried individuals. Both the types of loans differ in many ways, which can be understood by studying the pointers mentioned above.

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