Being self-employed and becoming your own boss is a dream for many of us. While some of us have partially realized this dream already and others are on the path of achieving it, the opposite side of being your own boss and being self-employed is the struggles we often face when we need a personal loan.
If you have been researching personal loans for some time now, one of the factors that you are surely aware of is the fact that lenders often prefer salaried employees over self-employed professionals when it comes to approving their loan applications. While the reason behind this can be credited to various different factors, the obvious struggle of getting a personal loan as a self-employed cannot be ignored.
If you are a self-employed professional and you need a personal loan in India, one common mandate which applies to most lenders is the requirement of income proof.
However, if you do not have an income proof present with you while working as a self-employed professional, it can become significantly difficult to get a personal loan; but it is possible nonetheless. Let us explore how.
How to Get a Personal Loan With No Income Proof?
As I indicated in the previous paragraph, getting a personal loan as a self-employed professional in India is significantly difficult as compared to being a salaried individual.
The reason behind this is simple. When you are a salaried employee, you have a fixed monthly income which gets credited to your account on the same day of every month. Thus when you submit the bank statement to your lender, they use this data as a yardstick to measure your creditworthiness and can easily determine that there is a high chance that you will pay back your loan on time, as you have a fixed monthly income.
On the other hand, when you are a self-employed professional, your income tends to vary widely every month and the dates at which the payments arrive also vary, which indicates to the lender that you might not always be in a financial position to pay back your loan on time, thus increasing the chances of a default. This is the reason as to why salaried employees are preferred over self-employed professionals by lenders.
If you are a self-employed professional in India, there are two main factors that a lender checks before approving your loan application. The first is your income proof, and the second is your credit score. However, if your income proof is not available, then the number of lenders who will grant you a loan significantly decreases.
The two lenders who give out personal loans to self-employed professionals without income proof are:
1. HDFC Bank
2. Fullerton India
Let us explore the eligibility criteria for both of them.
If you want to get a personal loan from HDFC bank as a self-employed professional without income proof, then you need to have 3 to 4 years of business stability in your discipline, along with having a current operational account with HDFC for at least a year.
The reason behind this is simple. If you have a current account with HDFC, you can share the same in your loan application, and HDFC will further use it to understand your creditworthiness. For example, if you have a good inflow and outflow of revenue and profits, it will indicate to HDFC that you have a solid income history and you will be paid back your loan with ease.
However, if you hold a current account with another bank, it becomes difficult for HDFC to understand your creditworthiness and subsequently approve your loan application.
The second lender you can approach for a personal loan as a self-employed professional is Fullerton India. In order to get your loan application approved, you need to have a current operational account with the institution for at least 1 year and also show the latest 3 years of your ITR returns.
The reason, as to why Fullerton asks for your ITR returns is simply to understand whether you are in a financial position to pay back your loan. Your ITR returns or Income Tax Receipt is a clear indication of your net revenue year on year, along with the amount of taxes you have paid and also your MPAT or minimum profit after tax.
If you don’t fulfil either of these conditions or fail to fulfil at least one, then the approval for your loan application can be significantly delayed.
Why Most Lenders Ask for Income Proof
If you have been planning to get a personal loan for some time now, then it is important for you to understand why lenders ask for your income proof along with your loan application. The reason behind this is simple.
As a self-employed professional, it is natural that your income will vary year on year depending on your business stability as well as the amount of business you conduct. Your income is a clear indication of all the revenue you have generated, the expenses you have borne to run your business and most importantly the amount left with you after all expenses that is your gross profit.
All this data helps lenders understand your creditworthiness and your ability to pay back the loan you have applied for.
Thus you can easily understand that as a self-employed professional if you have an income proof with you, the journey to getting a personal loan will be much easier.
Interest Rates for Personal Loans
As a self-employed professional, when you apply for a personal loan, the interest rates tend to vary from bank to bank and are usually in the range of 10.99 to 25% per annum. However, one of the most important aspects you need to note here is the fact that if you maintain a good relationship with the lender, then you can easily negotiate for a better rate of interest as well as getting a personal loan without income proof.
There is a common misconception among most first borrowers that you cannot get a personal loan without income proof in India. However, as we indicated in this article if you follow the right steps, you can easily get your loan application approved without income proof in no time. All the best.