These days, the market for self-employed and freelance workers is growing rapidly. Lenders have understood that the jobs like photographer, coder and graphic designer are paid well during seasonal times. So, the process of acquiring a home loan has been eased. Alternative Documents like ITR, F-16, income certificate, or bank certificate act as your proof of income in place of a salary slip. Some financial organizations may lend you a loan, even if your income source is inconsistent.
Procuring home loans via online means has been smoothed down for gig workers and freelancers. With the advent of modern data science and technology, some solutions assist test creditworthiness without depending on official income documents, traditional credit, or monthly income.
Generally, documents like a payslip, Form-16, Income tax returns, salaried employee, etc are required to get a home loan. As these documents ascertain creditworthiness. This determines the borrower’s payment capacity. Some of the other key factors are ‘intention to pay back money and ‘asset quality/security.
Now, let’s have a look at the ways to get a home loan without a salary slip. But before diving into the process, we have an important question to answer. And the question is what is home loan?
What is a Home Loan?
A home loan, also known as a loan against property, is a secured loan that a borrower can get from the lender to purchase a property. Instead of the loan amount, the borrower must offer the same property as collateral or security. Home loans provide high-value capital at low-interest rates and for extended terms. They are returned in the form of EMIs. After repayment, the borrower receives ownership of the property.
How to get a home loan without a salary slip?
Here we will find out the ways to obtain a secure home loan without providing salary slips.
Provide substitute proof of earning
Some new-age banks and NBFCs(Non-banking financial companies) now provide home loans to self-employed workers. Instead of demanding the custom documents, they seek alternate attestation for earning as they have understood the nature of their business.
If you are a freelancer or self-employed you may not have a salary slip. So, to avoid this barrier you can arrange your other monetary documents as an alternative. Including your ITR, income certificate, bank certificate, or Form 16. These financial documents display a steady income and ascertain lenders of loan repayment. This will provide authentication for cost-effective loans faster. Similarly, if you apply for a personal loan without a salary account, you will have to show other monetary documents to ensure a stable income.
Maintain a good credit score
Sustaining a good credit score plays a crucial role in loan disbursement. It does not matter what background you are from or what job you are doing. Maintaining a healthy credit score represents your repayment history. So, it is really important to have a good CIBIL score. If your credit score would be high then lenders would feel more comfortable sanctioning your loan. A credit score of 750 or above keeps you on the safe side and assists in securing financing easily. This will outshine your responsibilities for credit in the past.
Look into your savings account
The lender will examine your banking habits when approving a loan against property. If you have strong banking practices and have always kept money in your account, your chances of getting a loan rise. Check that your average bank account balance is double the amount of your anticipated EMI.
Explain your income to the bank officer
A bank officer will inspect the property before granting or refusing your loan. If you own a business or want to pledge a commercial property at this time, you must explain your income to the appropriate official. Also, inform the officer that you lack income verification and an ITR form. When estimating your yearly income and repayment ability, the officer will consider all of the information you give.
Good relation with the bank
If you have good relations with the bank, you can easily get your loan approval. You can build a relationship with the bank if you have an account (saving or current) in the bank.
Plus, if you have taken out a loan earlier or owned a credit card and paid all your dues on time, your credit score is good with the bank. In such cases, banks tend to provide loans easily without a salary slip.
Offer an asset as collateral
In case you are not able to manage your salary slip. You can inquire if a financial institution provides any secured loans, asset-backed security. As good collateral as high value, FD’s mutual fund unit and gold provide you support to lean on other than your current financial profile. If an applicant proffers their assets, they might get their Loan sanctioned without even having requisite income-based documents and may even get a lower interest rate.
Sign for funding with a partner
Applying jointly is the best alternative to a salary slip or income proof document. This is because your partner can fulfil the required financial proof documents and can show a good CIBIL score. Also, your co-applicant steady income can balance the creditworthiness which will give lenders the confidence to provide you with a loan. This way applicants can probably get a home loan sanctioned with ease. This will make way for a smooth application.
Basic eligibility criteria
To seek a secure home loan without a salary slip or income proof document. You can look for a lender whose home loan application is basic. Those banks that have minimum eligibility criteria are more likely to approve your loan application even if you are unable to provide them with salary slips. These lenders usually sanction the loan online with a lucid application and an easy documentation process.
Choose a lower loan to value
The loan to value (LTV) percentage is the percentage of the loan that the bank will lend. For example, if the LTV is 90%, the borrower must pay the remaining 10% while the bank funds the remaining 90%. If you do not have income evidence or ITR documents, consider seeking a lower LTV from the bank. Remember that if you choose a lesser LTV, you will have to pay the difference out of your own money.
Signup for peer-to-peer lending
Peer-to-peer lending is becoming increasingly common. Crowdfunding is used to gather funds on a P2P network, which are then released to qualifying borrowers with an interest rate. Under P2P lending, you may be charged a high-interest rate based on the risk element. This may be an alternative if you do not have valid income evidence or ITR information.
This feature is not a problem for salaried individuals, but if you are a self-employed person, you might have trouble trying to figure out how to get a secure home loan without a salary slip. These days, even the traditional banks have also upped their game and also adopted these alternate methods for providing secure home/personal loans. Lenders now use methods to check repayment ability. And this includes banking surrogates, cash flow analysis, industry margin method, repayment track record, income-expenditure method, etc.