As a chartered accountant with your practice, there are several expenses that you need to manage. From operational costs to compensating your staff, many expenses require substantial finances. One of the ways to manage these is via a loan for CAs.
This loan is tailored to your profession, but getting it requires you to meet certain eligibility terms. These parameters help lenders assess your creditworthiness and repayment ability. Based on these, they decide your loan amount, interest rate, tenure and other terms.
While these criteria vary across lenders, some standard factors affect your eligibility. For instance, your professional experience and degree are key to getting pocket-friendly loan terms and speedy approval.
By understanding these factors, you can enhance your eligibility and, thereby, the chances of getting your application for a loan for CAs approved. Read on to learn more about these factors and other important aspects of the loan.
5 Eligibility Factors That Affect Your Loan Terms
Here are some crucial that affect your CA loan eligibility:
Your Age at the Time of Applying
To get a loan for a CA, you must be between the age of 25 and 65 years. Lenders have these age criteria because an individual is generally working during this period. Therefore, you will likely have a stable income, ensuring timely repayment.
If you are under 25, there is a high chance that you may not have the required credit and work experience to handle a loan. Being above 65 implies that you have either retired or may soon do so. This usually means that your cash flow is limited, which increases the chance of default.
Given this, it is more likely that you will get favourable loan terms if you are over 25 but not too close to the age of retirement. In fact, many lenders require you to be under the age of 65 when your repayment tenure ends. This means that if you are 60, you may not get a loan with a tenure of more than 5 years.
Your Total Work Experience
Stable working experience indicates financial security and experience with finances. So, lenders prefer applicants with at least 4 years of experience as a CA. However, the required minimum work experience may differ depending on the lender.
Your CIBIL Score
Your CIBIL or credit score is an essential eligibility factor for any loan as it is a reflection of your creditworthiness. Since this score depends on your previous credit behaviour and repayment history, lenders offer competitively priced loans to those with a higher CIBIL score.
Generally, you can apply for a loan for a CA if your score is 720 or above. If your score does not meet the requirement, the lender may consider you a high-risk borrower and reject your application. Therefore, check and improve your credit score before applying.
Your Credit History and Utilisation
When assessing your application, lenders check your credit history. This includes your previous loans, defaults against your record, the number of credit cards you have, the types of credit you have availed, etc. Assessing these details helps them evaluate your responsibility and ability to repay on time.
Lenders also check how much credit you utilise to check your dependency on it. If you have a high credit utilisation, it implies that you may not be able to manage your finances well. This can make you seem like a high-risk borrower and lead to rejection.
As such, keep your utilisation under 30% by using your credit card/s judiciously. Having a good credit history and low utilisation not only boosts your chances of approval but also results in affordable loan terms.
Your Monthly Income and Obligations
Your earnings and current debts also impact your CA loan eligibility because they directly affect your repayment capacity. A high income with fewer obligations is favourable, as it means you can manage a new loan easily.
This is also what many refer to as the debt-to-income ratio. Ideally, your debt-to-income ratio should not be more than 35% to 40%. This means that if your income is ₹1 Lakh, your debt should not be more than ₹40,000 in total.
With these tips, you can ensure you meet the CA Loan eligibility criteria and secure financing.
Documents Required to Apply for a CA Loan
You must have the following documents ready for a quick and seamless application process.
- Identity proof: Aadhaar card, PAN card, driving licence, voter ID, etc.
- Address proof: Aadhaar card, voter ID, ration card, utility bills, etc.
- Income proof: Latest balance sheet, profit and loss statement, ITR, last six months’ bank statements
- Qualification proof: Degree certificate
- Business proof: GST returns and trade licences
These documents are not only crucial for paperwork, but also prove your eligibility. With these documents, loan providers assess your CA loan eligibility and reject or approve your loan application. However, remember that lenders may also ask for additional documents depending on your profile.
Factors to Consider Before Applying for a CA Loan
Here are a few factors that can help you get a better loan offer on a professional loan for CAs:
- Compare the available loan options by reviewing the eligibility terms and charges
- Maintain a high credit score to get better terms on your loan
- Have a lower credit utilisation ratio and debt-to-income ratio
- Keep your income documents and financial records up to date
- Choose a loan option as per your requirements and avoid taking on too much debt
- Do thorough research and apply for a loan from reliable lenders
With these factors in mind, you can decide the right time to apply for a loan for CAs.
Check your eligibility before applying to ensure you have everything you need. Use the eligibility and EMI calculator to optimise your application and borrow efficiently.