Documentation is an important part for any sort of bank related work. While applying for a loan, documents play a major role to make an individual eligible for the same. It is always important to keep the documents updated and well written to make a loan process easier. Any document type which is easily recognizable and in proper increases a document’s overall and the Bank/ NBFC‘s ability to use it efficiently and keep the work focused.
Banks/NBFC’s provide an important financial service that help the business as well as individuals to grow and enhance the performance of the business or other personal day to day activities. This financial service is termed as a Loan.
A Loan can be secured as well as unsecured. A secured loan involves some form of asset such as any building, house or any other property. An unsecured loan is not backed up with any security so the rate of interest on the borrowed amount is higher than any secured loan.
Business account services help in day to day transactions in smooth functioning of the business. Businesses also get a facility of Overdrafts that allows to borrow a short term credit to handle cash flow difficulties. Interest is charged on the borrowed amount each day.
Cheques, credit cards and bank drafts helps a business as well as an individual to smoothly manage its day-to-day payments and transactions. Bank statements assist in keeping a regular track on its accounting position.
While moving further to apply for a loan Bank/ NBFC require few basic identification and personal documents. Different types of loan require different types of documents. The following documents are categorized between Salaried and Non Salaried (Self – Employed).
Documents required for Salaried Professionals
Documents requited for Self – Employed
Just to know the documents is not sufficient until the customer is able to understand what exactly these documents refer to or they can be identified. We understand that the documents are also known as KYC’s but what exactly they mean can be understood easily with the following table:
First 3 letters represents any letter from A to Z.
4th letter represents the status of PAN Holder which can be any of the following :
- C – Company
- P – Person
- H — HUF (Hindu Undivided Family)
- F — Firm
- A — Association of Persons (AOP)
- T — AOP (Trust)
- B — Body of Individuals (BOI)
- L — Local Authority
- J — Artificial Juridical Person
- G — Government
The 5th character of the PAN is the first letter of the sir name of the person, entity, trust, society, organization etc.
The financial documents of the customer plays an important role to understand the credibility, intentions and repayment history. Financial documents reflects the financial strength, consistency of an individual as well as business, borrowed amount, assets & liabilities, variable & other source of income, regularity of income and expenditures and taxes. The major financial documents include:
Income Tax Return (ITR) : It is a form that assess the information about the customer’s income & tax. ITR has to be filed before a specified due date. Income Tax form vary from customer, source of income and customer & its business. Most recent Income Tax Return as well as computation of income has to be served for the loan processing.
Profit & Loss (P&L Statement) : Its a financial statement that summarizes the cost & expenses, revenues for a particular period of time. It provide information about the company’s ability to generate profit by increasing revenue, reducing costs or may be both. This statement can also be referred as ”income statement”, “statement of operations”, “statement of profit & loss”, “statement of financial results” and “income & expense statement”.
Balance Sheet : Its a financial statement that summarize the company’s assets, liabilities and shareholder’s equity at a specific point of time. The balance sheet gives the clear idea to the investor about what the company owns and owes, as well as the amount invested b the shareholders.
Salary slips : It is also known as ‘pay slip’. It is given by the companies to its employees. It clearly states the earnings for a particular time period. Its a proof of the earnings as well as the deductions. A salary slip helps to decide if the customer has to pay the taxes or not. It ensures to get the certain services from the government as free or with heavy subsidy. It shows the creditworthiness and the repayment capability.
Form 16 : Form 16 is a certificate given by an employer to its employees to certify that TDS has been deducted from the annual income of an employee. This form is issued once in a year that helps the tax payer to file the Income Tax Returns with the Income Tax Department.
Loan / Credit Card Statements : Lender will ask for the loan account statements to know about the existing balance, monthly payments and the current interest rates of the loan. It helps to balance the monthly payments due on the current loans and calculate the ability to manage the monthly payments and repay the recurring monthly expenses.
Banks/ NBFC’s stand to provide loans to businesses and are willing to work and support the customers to fulfill the needs and dreams. Lenders provide advisers who come to analyze the business, the need of money and recommend the right loan for you. Mudra Homes helps to guide the particular set of eligibility criteria and required documents. The first step is to gather the required updated documents before you begin the process to take a new move.