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What advantages do professional loans offer compared to regular personal loans?

Professionals looking to start their own practice, usually look out for various credit options available to them. A CA may want to set up their own firm, or a doctor may be in need of additional equipment to better treat their patients. In such cases, they can choose between personal or professional loans to get instant access to the required funds.  

In this article, we shall get a deeper understanding of how a professional loan works and what advantage it has over regular personal loans. However, let us first learn about what a professional loan is.

What is a Professional Loan?

Recently, there has been a rise in medicine, law, and accountancy professionals looking to start their own practice. For this purpose, they can opt for loan plans that are fine-tuned to support their unique needs better. These credit options are termed professional loans. 

In order to be eligible to apply for a professional loan for advocates or any other certified specialists, you will have to meet certain requirements. These include field-specific qualifications, having a good credit score, and minimum work experience as determined by the lender. 

The amount acquired via this type of loan can be used for multiple purposes. Expanding your clinic/firm, hiring more employees, upgrading your equipment, and more is possible with the help of this financial product. During the application process, you are usually asked to present certain documents. These include KYC documents, a Certificate of Practice (COP), details of work experience, and an educational degree.

How Does a Professional Loan Compare With a Personal Loan?

With the concept of a professional loan clear, let us compare these with a regular personal loan.

Professional LoanPersonal Loan
EligibilityMust be a certified professional who actively practises. Under this, doctors, architects, engineers, CAs, advocates and other professionals are eligible to get a loan.Can be taken by any individual, who is salaried, self-employed, or a professional.
Interest RateCan be lower than that of a personal loan due to the professional profile acting as additional security, which lowers repayment risks. Generally starts from 9.99% p.a.Higher than that of a professional loan as it carries a higher repayment risk. Generally starts from 10.49% p.a.
UsageUsually used for expanding or establishing one’s private practice. These include expenses like leasing workspace, meeting working capital requirements and more.Generally used during emergencies like unexpected medical payments. Also used for taking a vacation, organising a wedding, buying a car, and so on.

Another question that may arise is, are the end uses of a professional loan as flexible as that of a personal loan? Let’s find out.

Also Read: What Makes a Loan Against Property Important & Why Should You Take it

What Can a Professional Loan Be Used for?

The amount raised through professional loans can be utilised for multiple purposes. For example, if you are a CA and looking to expand your firm, getting a specially designed loan for chartered accountants can be beneficial. This is the case for loans provided to professionals in all other fields of work as well. Let us understand the various uses of a professional loan.

1. Upgrade and Purchase High-Tech Equipment – As a medical worker it is crucial that you own state-of-the-art equipment to be able to treat your patients well. Similarly, as an advocate or a CA having your technological systems, the internet, and devices like laptops work seamlessly for all staff members is important. Buying new equipment can be an expensive venture. This cost can be handled with the help of a professional loan.

Similarly, It is also important to update your existing systems. With the help of a professional loan, you can upgrade the hardware and software which is crucial to your line of work. Furthermore, you can also utilise this money to revamp your office space and offer more facilities to your employees and coworkers.

2. Expansion and Leasing – Expanding your practice and increasing its customer outreach is key to ensuring the success of your firm/clinic. For this purpose, you may be on the constant lookout for new workspaces. Leasing new offices, or expanding your current workspace can be a huge task. Such activities require huge capital investments, which can be fulfilled with a professional loan.

3. Working Capital Requirements – Maintaining a consistent cash flow to manage the day-to-day costs, along with necessary payments like that of utility bills is crucial. In order to ensure that you have enough capital to keep your practice running and tackle any emergency, you can get a professional loan. The amount borrowed can be utilised to manage your cash flow and ensure that nothing hinders your business.

4. Hire and Train Staff – An integral part of running your private practice is to have a team that you can trust. Hiring staff members and providing them with the required training is important. This can also be achieved with the help of money borrowed via a professional loan.

5. Consolidate Your Debts – Running one’s own firm or clinic requires a major capital investment in the initial stages. You may have acquired such an amount by taking multiple loans of varying tenures from various lenders at different interest rates. This can make it hard for you to manage your finances. An easy way out of this is to take a professional loan and consolidate all your debts. This helps you avoid the confusion arising from having to pay multiple EMIs and keep track of your liabilities. 

6. Personal Emergencies & Requirements – The amount raised through this loan is not restricted to just business needs. It can also be used for personal requirements. Be it closing a personal loan or paying medical bills, all of it can be taken care of with the help of a professional loan. 

Also Read: The Four Most Important Factors Affecting the Gold Rate

Professional loans for chartered accountants, advocates, architects, doctors, and other professionals are designed specifically to cater to their needs. Meanwhile, personal loans are also a feasible option for anyone looking to borrow a vast amount instantly. Take advantage of these credit options and grow your firm/clinic by upgrading your facilities and ensuring smoother cash flows.

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