- When do banks sanction loans to non-salaried applicants?
- The sanction will depend on meeting the eligibility criteria, which can be different for different loans - Let’s read all that and more here!
Banks trust salaried more than non-salaried largely because the former can have a better flow of income compared to the latter whose income can be irregular. No bank likes to bear the loss resulting from the pile of bad debts i.e. Non-performing Assets (NPAs), a term which you may have come across while reading financial journals. Irregular income poses a challenge to banks as far as recovering the loan dues are concerned. But that does not deter banks from lending to non-salaried applicants. Maybe the interest rate could be higher for them. So, if you are non-salaried i.e. self-employed, you might ask, how can I get a bank loan? Well, you just need to meet the loan eligibility criteria as stipulated by banks. And there are not one but multiple loans available for self-employed applicants. Just read the eligibility criteria for different loans put out here and apply if you are eligible.
Loans Available for Self-employed Borrowers in India
A self-employed borrower can get a personal loan, home loan, car loan, gold loan or any other loan. The loan eligibility criteria will be different for self-employed, and that’s understandable given the constant variation that can be expected in their income patterns. Let’s now get to each of the loans mentioned above and see the eligibility criteria that banks have put for self-employed to meet.
Personal Loan Eligibility Criteria for Self-employed Borrowers
Self-employed people can get a personal loan from various banks in India to fulfill various purposes such as marriage, education, travel, medical emergency, etc. Banks assess personal loan eligibility of applicants, based on their income and credit score, for a maximum of 5 years. The credit score should be 750 and above to get a personal loan in a hassle-free manner. Let’s check out the top banks that offer personal loans to self-employed and the conditions they put in place for these applicants.
ICICI Personal Loan
ICICI Bank is one of the largest private sector banks widely known for offering customized personal loan deals to self-employed applicants. It offers loans at interest rates ranging from 10.75% - 19.00%. Let’s check out ICICI Personal Loan eligibility criteria for self-employed.
- Applicants must be between 28 and 65 years of age. However, the minimum age for self-employed doctors is 25 years.
- Non-professionals must have a minimum business turnover of INR 40 lakh in a year. Whereas, the turnover of professionals should be a minimum of INR 15 lakh in a year
- Minimum profit for self–employed should be INR 1-2 lakh in a year
- Self-employed must have business experience of at least 5 years. Doctors can, however, get a loan even if they have business experience of 3 years.
- Applicants must have an account relationship with ICICI Bank for at least one year or a loan either running or have closed within 36 months
IDFC First Bank Personal Loan
IDFC First Bank is also one of those offering personal loans to self-employed applicants in India. The private lender offers personal loan interest rates of 10.50% - 25% to its applicants. Let’s find out the IDFC First Bank Personal Loan Eligibility criteria for self-employed applicants.
- The minimum and maximum age of the applicant should be 25 years and 65 years, respectively, at the time of loan application
- The applicant must have been doing business for at least 3 years
- The company must have posted positive net profits in the last two years
Standard Chartered Personal Loan
Standard Chartered Bank offers personal loans to self-employed professionals – chartered accountant and doctors. These applicants can get loans beyond INR 10 lakh at attractive interest rates of 12%-15% per annum. But what do they need to get a Standard Chartered Bank Personal Loan? Let’s find out.
- The applicant must be a minimum of 26 years old and a maximum of 70 years
- The applicant must have a work experience of at least 3 years
- The Income Tax Return (ITR) for the last two years must be more than 1 lakh
- The latest ITR should not be more than 130% of the previous year’s ITR
- The difference in the previous year ITR and the current one must be a minimum of 3 months
Bank of Baroda Personal Loan
Bank of Baroda personal loans are offered to self-employed professionals such as engineers, doctors, interior designers, architects, practicing company secretaries, management consultants. These professionals must have a stable business for at least a year. The bank also offers personal loans to self-employed businessmen having business stability of at least one year. All these individuals can service personal loans at interest rates ranging from 10.90% - 18.25%.
Documents Needed to Submit to Get a Personal Loan in India
If you meet the personal loan eligibility of any of the banks mentioned above, the next step is to submit the following documents and get the loan.
- Identity Proof – PAN Card/Voter ID/Driving License/Passport/Aadhaar Card
- Residence Proof – Voter ID/Driving License/Passport/Aadhaar Card
- Income Proof – Income Tax Return (ITR), Profit & Loss Account and Balance Sheet for the Last 2-3 Years
- Duly Filled and Signed Application Form & Latest Passport Size Photographs
Home Loan for Self-employed Applicants
Self-employed applicants can get home loans from several banks and housing finance companies in India. The loan is financed upto 75%-90% of the property cost, with the remaining (10%-25%) to be paid by the borrowers. The interest rate for these applicants will be more than salaried. You need to have the required income as well as sufficient working period to pay the home loan EMI. Let’s check out the home loan eligibility criteria of different lenders.
SBI Home Loan
State Bank of India (SBI) offers home loans to non-salaried applicants having done business for at least 3 years. These applicants must have earned a net profit for the last two years. If the home is purchased jointly by the proprietor and proprietorship firm, the latter should be a debt-free entity. Non-salaried can get a home loan as soon as they become 18 years old. They can get the loan for as long as 30 years. These applicants can get a loan of as much as INR 50 crores, depending on their income and existing debt obligations. SBI home loan interest rates for self-employed range from 7.10%-7.60%, more than 8.80% - 9.75% offered to salaried applicants.
HDFC Home Loan
HDFC Limited offers home loans to both self-employed professionals and non-professionals at attractive interest rates. While the home loan interest rate for professionals remains the same as salaried at 8.50% - 9.60%, the rate for non-professionals is more at 7.10%-8.00% per annum. Self-employed professionals eligible for HDFC home loans include doctors, lawyers, chartered accountants, architects, consultants, engineers, company secretaries, etc. Whereas, non-professionals would be traders, contractors, commission agents, etc.
ICICI Home Loan
ICICI is also a frontrunner in the home loan business, like the previous two – SBI and HDFC Limited. Non-salaried applicants can be approved for ICICI home loan if they have a regular source of income. The maximum age for them can be 65 years till the proposed maturity of the loan. ICICI Home Loan Interest Rates for non-salaried is 7.20%-8.05%, more than salaried who can get it at 9.65% - 10.05%.
LIC Housing Finance Home Loan
LIC Housing Finance Limited gives banks a good run in the home loan segment by offering customized deals to customers. It offers loans to non-salaried and non-professionals at varied interest rates ranging from 7%-7.90%, which is slightly higher than 8.65% - 10.25% offered to their salaried counterparts. The maximum tenure for non-salaried won’t be more than 20 years, which is 10 years less than what can be offered to salaried applicants.
Documents Needed to Get a Home Loan from Banks/Housing Finance Companies
Non-salaried applicants must submit the following documents to get a home loan from banks or housing finance companies in India.
- Identity Proof – PAN Card/Voter ID/Passport/Aadhaar Card/Driving License
- Residence Proof – Voter ID/Passport/Aadhaar Card/Driving License/Utility Bills and Establishment proofs like GST/VAT registration
- Income Proof – Income Tax Return (ITR), Profit & Loss Account and Balance Sheet for the Last 3 Years
- Property Documents – Agreement to Sale, Sale Deed, Flat Allotment Letter, Property Map, etc
- Duly Filled and Signed Application Form
- Latest Passport Size Photographs
Car Loan Eligibility for Non-salaried Applicants
Non-salaried applicants can also apply for a car loan to buy a brand new 4-wheeler. The car loan eligibility depends greatly on the applicants’ income and their credit score. If your earnings are such that you can repay the loan comfortably, and have a credit score of more than 750, you will not have any problem in getting a car loan. You can pay this loan over a maximum of 7 years. Let’s check out the car loan eligibility criteria of different banks for self-employed.
SBI Car Loan
SBI is one of the premier players in India’s fragmented car loan segment. It offers car loans to non-salaried applicants such as self-employed businessmen, proprietorship & partnership firms and companies who are income tax assesses. What is the SBI car loan eligibility criterion for these applicants? Let’s find out below.
- You should be 21-67 years of age
- The minimum net profit or gross taxable income of the applicant should be INR 3 lakh a year
- Self-employed applicants can get a loan of upto 4 times net profit or gross taxable income
- In case you generate income through agriculture and allied activities, the net annual income should be a minimum of INR 4 lakh. The maximum loan amount in such a case can be 4 times the net profit or gross taxable income after factoring in depreciation and existing loan obligations, if any
Note – The maximum loan is, however, capped to 90% of the on-road price
HDFC Car Loan
HDFC Bank is arguably the market leader in the car finance space of India. The bank offers car loans to self-employed individuals and professionals of proprietorship firms, partnership firms, private and public limited companies. These applicants must have business experience of at least 2 years and should have a minimum earning of INR 3 lakh per annum. They must have been into manufacturing, trading and service businesses to apply for a car loan.
Axis Bank Car Loan
Axis Bank offers car loans upto 100% of the on-road price of the new 4-wheeler for a maximum of 8* years. The loan is available for self-employed individuals and non-individuals apart from salaried individuals. Self-employed individuals must be a minimum of 18 years at the time of loan application. Their maximum age can’t be allowed to exceed 70 years at the proposed loan maturity. The annual business income of both self-employed individuals and non-individuals should be a minimum of INR 1,80,000-2,00,000. Plus, they need to be in the same line of business for at least 3 years.
Documents Required for a Car Loan in India
Self-employed must submit the following documents to get a car loan in India.
- Identity Proof – PAN Card/Voter ID/Driving License/Passport/Aadhaar Card
- Residence Proof – Voter ID/Driving License/Passport/Aadhaar Card/Utility Bills and Establishment Proofs such as GST/VAT Registration
- Income Proof – Last 2-3 Years ITR, Profit & Loss Account and Audited Balance Sheet
- Duly Filled & Signed Application Form
- Latest Passport Size Photographs of Applicants
Gold Loan Eligibility for Non-salaried Applicants
Gold loans can be offered to non-salaried applicants without any income proof. Even if they don’t have a credit history, the loan can be sanctioned to these applicants. The loan disbursal is dependent mainly on gold ornaments that you will need to submit to the lender. Both banks and gold finance companies will check the weight of gold in such ornaments before ascertaining the value according to the prevailing market price. The loan can be disbursed at around 65%-90% of the value of gold. The 90% loan quantum rule applies to banks only, which was announced by the Reserve Bank of India (RBI) in its last monetary policy meeting held in August 2020. As per the announcement, banks can extend gold loans upto 90% of the value of the ornaments till March 31, 2020. Apart from gold, you need to submit your identity and address proof too. Within an hour or so, the loan can get disbursed to your account. You will then need to repay it over 1-3 years. Some banks can give you more years to repay the loan.
Loan Against Securities
Like gold loans, here also, lenders don’t require income proof and credit score to sanction you a loan. You can get it purely based on the securities you submit, such as fixed deposits, mutual funds, shares, bonds, etc. Now, the loan quantum depends on the type of security you submit. As fixed deposits offer fixed income to investors, the degree of investment risk is minimal. So, the loan amount can be around 85-90% of the fixed deposit value. Whereas, shares and mutual funds, particularly equity funds, can be increasingly dictated by the market movement. Positive market cues can lift the market to new highs, increasing the investment value of these instruments. At the same time, the market can get jolted by negative developments surrounding the economy and politics to take some steam out of your investments. So, the market will have fluctuations, and considering that, the maximum loan can’t be more than 50-60% of the investment value of shares and equity mutual funds. Whereas, bonds and debt funds can grant you a loan upto 80%-90% of their investment value. It’s because the degree of investment risk in these two instruments is quite lower than their equity counterparts.