If you are a self-employed chartered accountant (CA), you may need money to meet the fund requirements of your practice. Capital is limited and you may need to procure external funding sources.
Financial institutions offer specially customized loans for CAs to meet their unique professional and personal needs. These are as follows:
Personal loans for CAs: An amount of up to INR 50 lakh is availed to meet expenses, such as a wedding, children’s education, or home renovation.
Business loans for CAs: You may borrow up to INR 50 lakh to fund business expansion, cash flow, maintenance, or other related expenditures.
Home loans for CAs: With this type of chartered accountant loan, you may either buy a new house or transfer your current outstanding loan. You may also avail a top-up facility to meet additional fund requirements.
Loan against property for CAs: Under this option, you may avail up to INR 3.5 crore to meet high-ticket needs like branch expansion, higher education of your child at an international university, or buy a new property.
These types of loans may be an affordable and convenient way to meet the fund requirements. However, you need to consider some important factors before you avail such a loan. Here are four considerations:
1. Evaluate the available options
As a Chartered Accountant, you already understand the financial terminologies and definitions. This allows you to make an intelligent and informed decision while availing a loan. Nonetheless, it is crucial that you do an in-depth analysis of various products offered by different lenders to make an accurate decision.
Choose the best loan from the aforementioned options that fit most of your requirements. Check if you are able to avail an unsecured loan or whether you need to mortgage your property to avail the funds. Moreover, you need to check the repayment tenure for each type of loan and determine the one that is as per your financial situation. Last but not the least, check and compare the rate of interest levied by various lenders to find the most affordable option (it may not always be the one with the lowest rate).
2. Maintain a good credit score
Your debt management capabilities are directly related to your repayment abilities. Therefore, every financial institution evaluates your credit score prior to sanctioning your loan application. In case, your credit score is low you may find it difficult to qualify for this kind of loan.
In case your credit score is low, there are multiple ways to improve it. To improve your credit score, pay off all overdue, refrain from taking additional loans, and pay existing liabilities on time. Once your score improves, you may consider opting for a CA loan.
A high credit score not only improves the possibility of receiving a sanction but also helps in reducing the rate of interest. If you opt for a business loan, it is important you avoid combining personal and business credit history as it could have a negative impact on your score. Moreover, your business may require a robust credit history to grow at a quicker pace.
3. Keep updated records
Often, you ensure your clients' books and records are all maintained and kept updated. However, you may not follow the same discipline for your practice. If there is any gap, it is recommended you rectify the same before applying for a CA loan.
Lenders will require certain documents, such as income tax returns, business assets, bank statements, and other information when you apply for the loan. Therefore, being prepared before applying ensures the procedure is completed without any trouble in a quick manner. If required, consider using bookkeeping and invoicing software to make it convenient and easier to maintain your records.
4. Conduct extensive research and seek advice
Conduct your research to understand what a CA loan is. You may check with your regular institution to know more about such loans. It is recommended you avail all details related to such loans, such as terms and conditions, interest and other charges, and features. Taking the time to do this research will help you understand whether the loan will be suitable for your purpose or not.
Speaking with someone who has already availed this type of loan will also help you understand its suitability. They may be able to guide you and provide you with the right advice to maximize your benefits. Moreover, they are able to tell you the exact procedure to apply and avail of a CA loan and what information and documents would be needed at the time of application.
