These days no doubt to get a loan is very easy process. But still money lending by Banks/ NBFC’s involves a risk. With this situation, when someone says that a loan without documents is available. The question arises that without financial reports, salary slips or the ITR’s how can money lending is possible? Is it really true or just a gimmick to attract the customers. how can loan be processed without the mandatory documents of an individual? Buying a home, because Banks/NBFC’s do not give a home loan without any income proof.
It is important to understand what does “loan without document” means.
This can be defined as when no financial verification regarding the income levels is done from the Bank/ NBFC’s side to get the borrower financed or to fund a loan. But, this is not exactly the truth. As no lender can sanction the loan without any verification. Yes, Banks/ NBFC’s lend money with a lesser number of documents but there are other factors and complications associated with the process.
For this kind of a loan a lender may take more than a normal time to sanction the loan. NO financial organization approves the loan in 5-10 minutes. Though, sanction letter do not take much time. So it is important to understand the meaning of sanction letter of a loan. Sanction letter do not confirm the disbursal of the loan amount. It only confirms that the borrower is eligible to get the loan from that Bank/ NBFC. Sanction letter is issued when the detailed verification is done.
For the loan without documents the borrower has to pay the higher rate of interest. High rate of interest is charged from the borrower because of the less documents and the loan involves higher risk.
It has to be noted that Loan without documents is only given as a Secured Loan. It can either be a Home Loan or a Loan Against Property. One can apply for a home loan for your dream house even if you get your salary in the form of cash and the employment status can be verified. The under served segment, who has not been able to attain financial support from financial institutions due to no availability of financial documents like The cab drivers, small shop keepers, a book seller, printing/ mobile repairing, suppliers and other professionals can avail this loan . However, Income Tax Returns (ITR) of last 2-3 years are one of the most important documents required by any lender. It proves to be a legal proof of the borrower’s income. One can easily file a latest ITR even if it is not filed recently or in the past.
The following set of points can help and guide you to get the loan easily.
Display the clear picture
Discuss the business model along with all the information like list of debtors/ creditors, trade payables and receivables and business vintage etc of past 1 year with the credit officer when he visit the business premises. Always show the complete business premise, equipments, staff in the organization etc. The credit officer might ask you to show your current inventory level, seller purchase list at the time of personal discussion. It becomes crucial in case of no ITR. All this information can help to conclude the annual income and the repayment capacity of the borrower.
Give Real Justifications
An applicant has to justify for not maintaining the ITR. One should avoid filing for ITR’s for the last years on the same date. If the borrower do not have an ITR, you should consult a CA to file your ITR for this year atleast.
Good Credit Score
It is important to maintain a good credit score and more in case of no ITR. A credit score of more than 750 or 800 can give some leverage to Banks/NBFC to move ahead with your application. Paying existing EMI’s will always be an added advantage for future. (Know more about credit score)
Healthy Banking Habits
If Bank/ NBFC notice a good banking habit with a maintained average bank balance, chances of loan sanctioning increases.
Ask for Lower LTV (Loan To Value)
LTV refers to the amount a Bank/ NBFC can lend to the borrower. A 85% of LTV indicates that the borrower has to arrange only for the 15% of the proposed loan value and the rest can be financed by the Banks/ NBFC’s. In case of no ITR, one should ask for lower LTV from the financial organization to make your application more creditworthy.
Look for HFC’s That Offer Loan Without ITR
There are certain Housing Finance Companies which provide loans to an individual without ITR, depending on the case. Lender will also consider the above points. Though, loan repayment might come with high rate of interest.
Add a Co-Applicant
Add a co-applicant to increase the credit worthiness in case of no ITR. A good co-applicant can give an additional assurance to the lender.
References given by an applicant and other references like 3rd party checks and market references (preferably with an existing clients of Banks/NBFC’s) plays an important role in case of less or no documents.
Banks/ NBFC’s analyze an assess eligibility of a salaried person by verifying the following details
- Personal visit to the employer premises as well as the borrower’s residential place to know more about the living standards of the borrower
- Employment duration should be minimum 3 to 5 years
- Income certificate from the employer
- If the applicant has taken any advance in the form of loan from the company
- A personal discussion is done with the employer regarding the authenticity of the information provided to the Bank/ NBFC, character and the behaviour of the applicant.
A businessman eligibility is judged by considering the following points:
- Personal visit to the business premises as well as the residential place to know more about the living standards of the borrower
- Personal discussion is the main key
- Cash books/ kachcha bills are verified
- Feedback from the suppliers & the regular customers
- Few Banks/ NBFC’s hire a 3rd party verification agency, mostly chartered Accountants who visit the business premises to have detailed look and the discussion with the borrower. He also cross check the cash books/ kachcha bills to verify and then prepare a detailed report based on the visit, discussion and the documents shown at the time of visit. This report helps the Bank/ NBFC to take a right decision.
Our Indian Financial market is expanding day by day. All customers of all categories get different options as per their need. Micro Housing Finance Companies mortgage the house to be financed or the property for which the loan is being applied. They do not require any other security or any other guarantor.