Due to uncertainties in the job market, most Chartered Accountants (CAs) are looking to set up their practice. However, the cost of setting up a practice or expanding one can be very steep.
However, a CA loan can be a great alternative to fund the expenses associated with running your practice. Here, you still pay a cost, in the form of interest rates, which depends on factors like tenure.
How CA Loan Tenure Impacts the Loan Interest Rates
As mentioned, tenure is a crucial factor that affects the CA loan interest rates the lender offers. Here is a look into this impact:
Longer Tenure
Generally, a long tenure is when you borrow funds for 5-10 years or more. This means that the lender will receive the money lent to you after a relatively long period. As such, lenders consider it riskier as it increases the possibility of a default payment.
Such circumstances could arise due to uncertain market conditions and unforeseen financial burdens. Lenders generally levy a higher interest rate on a CA loan to compensate for the increased risk. A higher interest means a higher borrowing cost.
However, longer tenure can also be more convenient as the EMI amount tends to be lower. This is because the number of instalments is more, helping reduce the burden in each instalment.
Shorter Tenure
Compared to a longer tenure, a shorter one is when you repay the funds in just a few years. This means the lender will get their money back relatively sooner. This reduces the potential impact of economic fluctuations on your financial health, lowering the risk of default.
Thus, lenders generally levy a lower CA loan interest rate if you choose a shorter tenure. However, the EMI amount for a shorter tenure will generally be higher than that of a longer tenure. This is because the number of instalments is less, increasing the instalment amount.
Thus, before opting for a shorter loan tenure, understand the loan terms carefully and assess whether you can repay higher EMIs without defaulting in repayments.
Lender’s Policies and Market Conditions
The relationship between the CA Loan interest rate and tenure also depends on external factors, such as market fluctuations and lender policies.
For instance, economic conditions, inflation, and central bank policies play a crucial role. If the rates are high, the loan interest rates will also be high and vice versa. Additionally, lender’s internal policies are instrumental in determining interest rates.
Costs Associated with Running a Chartered Accountancy Practice
Here are some of the expenses that you will have to incur to make your practice operational:
Rentals for the Office Space:To set up your practice, you will have to rent or purchase an office premises
Employee Payroll:At the beginning level, you will need at least 2-3 staff members, depending on your clientele, and compensate them accordingly
Technological Costs:A CA practice is highly dependent on software like Spectrum, and Tax Power, which means you would have to purchase computers and maintain them
Utility Costs:The utility costs include expenses for communication, power, systems, equipment, and office supplies
Practice Certificate Fees: The Institute of Chartered Accountants of India (ICAI) requires associate and fellow members holding COPs to pay an annual fee of ₹5,310 and ₹8,260, respectively
How CA Loan Helps in Securing Funds for Practice
A CA loan is a type of professional loan specially designed to cater to the financial needs of chartered accountants. You can use this lending facility to get funding for the following purposes:
Buying an office space
Expansion of your office
Purchasing equipment
Paying employee’s salaries
Meeting working capital needs
These loans come with a variety of benefits for chartered accountants. However, to get this loan, you need to have a valid professional degree/certificate and have the required experience. In addition to this, you also need to meet the eligibility requirements set by the lender.
The eligibility criteria for online loans for chartered accountants are generally simple. These only require minimum documentation, age, and income requirements. Thus, a CA loan can make high loan amounts available to you easily at competitive interest rates.
Features and Benefits of a CA Loan
Like other professionals like lawyers, doctors, and so on, chartered accountants also have unique professional goals. To fulfil these goals, you may require customised financing solutions like CA loans.
Here are some of the characteristics and perks that you get to enjoy with a CA loan:
Adequate Loan Amount
The loan amount may vary for different financial institutions. However, most offer substantial funding, ₹55 Lakhs or more. The amount you can get depends on various factors, like your credit history, the nature of your business, and income levels.
Flexible Repayment Tenure
Most lenders allow you to choose from flexible repayment tenure options. You can choose a repayment plan based on your cash flows and revenues. Generally, the tenure for a CA loan can go up to 8 years or more. Remember the impact on interest rates before finalising.
Collateral-Free Loans
Many lenders allow CAs to secure capital for their practice without a guarantor or collateral.
Hence, these are unsecured loans, wherein the loan terms depend on your creditworthiness. Financial institutions also consider the cash flow and revenue of your business before finalising the terms.
Instant Funding
Online lenders offering a CA loan are available throughout the day. Not only that, these lenders also offer instant approval of your loan request and disburse the amount into your account within a few hours. As such, you get the required funding without going through a tedious process.
Competitive Interest Rates
While CA Loan interest rates may vary from lender to lender and depend on a few factors, most offer competitive rates. You can get interest rates starting at 11% per annum.
Minimum Documentation
To get a professional loan for CA, lenders require you to furnish minimum documentation. This generally includes basic KYC documents, business proof, income proof, and qualification proof. You can check the lender’s website to know the exact requirements.
Convenient Facility
A CA loan is available online at various lending platforms, and as such, you can secure funding from the comfort of your home. In addition to this, you can manage your funds through an online loan account. The online services also make tracking and managing your loan easier and simpler.
Most lenders offer different types of CA Loans, each having unique features and catering to different needs. Remember, the interest rates of a CA loan will also depend on the type of loan you choose.
This is because the different types of CA loans have different repayment structures, including tenure. To compare and choose the right option, you can use the EMI calculator to understand each type’s borrowing costs and EMI amount. Afterwards, you can choose the loan type that best fits your requirements.
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