Personal loans can come across as a vital financial tool to meet unexpected expenses. However, many borrowers face hindrances in securing personal loan for multiple reasons, such as lack of a credit history or a salary proof. However, one can obtain a personal loan even without salary slips. Let’s explore the options.
Key Considerations For Lenders
Lenders typically assess the borrower’s repayment capacity through salary proofs, which usually includes documents, such as pay slips or recent bank statements. Thus securing a loan often proves to be difficult for people who work as freelancers, are self-employed, or have an irregular income.
However, one can still improve his/her chances of securing a loan through documents, such as bank statements, Form 16, Form 16A, or, if one has just quit one’s job, a recent income tax return (ITR).
How To Secure A Loan Without Proof Of Salary
Here’s how you can secure a loan without having a proof of salary.
1] Explore Digital Lending Platforms: Many digital lenders streamline the borrowing process, often waiving the need for salary slips. Instead, they may focus on your credit history and financial behaviour. While salary proof might not be necessary, you may still need to provide them with your bank statements to support your application.
2] Provide Alternative Income Proof: Consider offering other documents to support your loan application. These might include your ITR, profit and loss statement of your business, or recent bank statements showing regular credit into your bank account.
3] Explore Secured Loan Options: You could also consider pledging your assets as a collateral for securing a loan. Depending on the amount of loan required, these could include your real estate or bank deposits or even stocks or mutual funds. Keep in mind that failure to repay the loan could lead to forfeiture of the asset/s by the lender.
4] Consider Joint Applications: You could also consider applying for a loan with a co-applicant who has a stable income to enhance your chances of approval. The co-applicant’s income proof and credit history will provide additional assurance to the lender.
5] Boost Your Credit Rating: A robust credit score can compensate for the lack of salary verification. Maintaining good credit habits and managing your existing debts responsibly can improve your credit score and strengthen your loan application.
Risks To Consider
While it is possible to receive a personal loan without providing evidence of income, it is essential to understand the dangers. The lender will likely offer the loan at a higher rate of interest because they will likely consider applicants without a salary slip as risky, compared to those with a regular source of income (regular salary). The borrower could also be given a shorter loan repayment period, which might result in higher monthly equated instalments (EMIs), thus putting additional strain on the borrower’s monthly budget. If one chooses a secured loan, they also risk losing their collateral if they default on the loan.
