Kashif was a freelancing chartered accountant (CA) since 7 years. He always aspired to start his own business. However, he couldn’t fulfill his dream as he wanted to pay-off his home loan before he took another loan to start his business.

Now that his loan was repaid, Kashif thought of taking a CA loan to start his business. He had seen many of his clients committing the error of not knowing about the loan and falling into a debt trap due to negligence. Kashif didn’t want to commit the same mistake. Thus, he did plenty of research before applying for a CA loan.

Let’s look at everything that one needs to know when applying for a CA loan.

  1. Flexible loans:

When you think of a loan, you usually only think of a term loan where you get the full amount and pay it back in equated monthly installments (EMIs). To make it easier for you to manage your finances, some lenders offer you loan flexibility. The loan amount is disbursed in the form of a line of credit. You can make multiple withdrawals and deposits. You are only charged interest for the amount utilized. You repay the principal at the end of the tenor.

  1. Interest rates:

Some loans can prove to be expensive in the long run. However, when you opt for a CA loan, you get interest rates lower as compared with other loans. This is because the lenders consider you a reliable borrower as you are a chartered accountant. Your EMIs and the interest outgo is influenced with the interest rates. Thus, it is advisable to compare the interest rates from different lenders.

  1. Tenors:

CA loans also come with flexible tenors. If you can afford a higher EMI, you can choose a short tenor. However, for a lower EMI, choose a longer tenor. You can choose from tenors ranging from 12 to 60 months depending on your requirements.

  1. Easy processing:

This tailor-made product is collateral-free. Hence, you can expect a quicker processing time. A CA loan could be crucial to cracking a business deal. Thus, a timely disbursal could be the difference between huge profits and futile deals. Because CA loans are collateral-free, they require less documentation. Hence, they are processed quickly.

  1. Higher loan amount:

Starting or expanding your business requires substantial funds. However, most loans demand a guarantor or a collateral if you are seeking a higher amount. With CA loans, you get loans up to 30 lakh without guarantor or collateral.

  1. Online access:

When you have the responsibility of handling a business, you don’t want to run around for loan statements. To ensure you have all the information in real-time, online portals help you access loan statements and details at the click of a button. All you need to do is key in your user id and password.

  1. Pre-approved offers:

Lenders want to reward their loyal customers. If you are an existing customer, you may be offered attractive deals with lower interest rates. You can choose to avail the offer when you are expanding your practice.

  1. Eligibility criteria:

To avail a CA loan, you must first fulfill certain eligibility criteria. The criteria may vary across lenders and is usually listed on their website. The basic requirements include:

  • You need to have a practice of a minimum of 5 years
  • You must have your own home, parental home or office
  • You need to have a minimum monthly salary Rs.75,000 for Tier 1 city and Rs.40,000 for Tier 2 city
  1. Documents:

While minimum documentation is involved, lack of either document could lead to rejection. The list of documents includes

  • Certificate of practice
  • Form 16 for the past two years
  • Salary slips
  • Salary account bank statement
  • Educational certificates
  • PAN Card
  • ID proof
  • Address proof
  • Property proof
  1. Fees and charges:

Lenders levy a charge if you default on your payment. You could also incur some charges in the form of penal interest, secure fees, foreclosure and part pre-payment charges depending on the lender. You should consider these charges to ensure that the loan doesn’t get costlier in the long run.

To sum it up:

Blindly opting for loans that are not suitable to you could prove futile. CA loans could be of great assistance when trying to setup or expand your business. However, ensure that you know everything about the loan that you are applying for.

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