Personal Loan against FD: 7 Reasons to Apply

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Emergency money requirement can be fulfilled through various options such as personal savings, lending money from relatives or friends, using credit card. But if these options do not fulfill the emergency money demand, then taking personal loan is the best option. You can get personal loan from financial institutions such as banks/financial service companies and others or peer to peer lenders or private money lenders.

Not many of us are aware that banks offer multiple options to take personal loan and one of the option is personal loan against fixed deposit, which is nothing but a secured loan in which you pledge your FD account as a security.

But when should someone choose for this type of loan. Listed below are the reasons when to prefer loan against term deposit.

Low CIBIL score: An individual who defaults monthly EMIs consistently or over-crosses the credit limit or does not pay the EMI fully is more likely to have a low CIBIL score. So in future, whenever they apply for personal loan, chances of rejection are very high. Such individuals are risky for any lender as they are predicted to default in the future as well and turn out loss making for a financial institution.

Although a default can be due to many reasons such as job loss, other emergency or financial instability etc. but banks do not care about this. They want their money back along with the interest applied (as high as possible). So for such individuals, personal loan against fixed deposit is the most recommended option. There is no credit history check and neither the banks will ask for any income proof.

Loan rejected: If someone applies for a regular personal loan but faces rejection due to whatsoever reason, then applying for a loan against FD is a better alternative. The success rate is quite high and eligibility criteria are not very stricter compared to a normal personal loan.

Loan amount required is small: One of the biggest difference between personal loan against FD and regular loan is that the interest rate charged is very high in case of normal personal loan. E.g. if you take personal loan of Rs. 3, 00,000 then interest charged would be between 16%-20% whereas in case of FD, interest would be 4% – 5% less but higher than 2%-3% of the interest received on FD. So loan against FD should be preferred over normal one, if the loan amount is small, as you will save money on interest. But remember that, you can get higher loan amount in case of FD, only when the investment in fixed deposit account is very high. This is typically not the case i.e. investing huge sum of money in FD is not a recommended investment avenue.

For short term: If someone wants money for short term and is ready to close the loan within a short time period, then choose for loan against term deposit. Early closure of a regular loan will result in pre-closure charge which is not the case in overdraft loan. You can close it anytime and there won’t be any charges.

No CIBIL score: Lenders first check CIBIL score and then take decision on approval or rejection. Individuals with no credit history will naturally have no credit score. And lenders have no way to judge their financial history and evaluate credit worthiness. Typically individuals fitting in such categories are students, housewives, recent graduate with no job at present. Such individuals can choose for taking loan against FD. Of course they will need to money to open FD account, which they can do by using their own savings or asking their friends or relatives.

Additional reading: Various 8 options to get personal loan when you have no or low CIBIL score.

Save money: Other reason loan against FD is recommended is that it is a money saver. When someone applies for and receives personal loan then there is a processing fee applied. But in case of loan against FD, there is no processing fee and also very few banks charge a prepayment penalty which is always charged in a normal loan.

No salary slip or income proof: Lenders always ask for income proof for evaluating the repayment capacity of the applicant. However not everyone gets income proof or salary slip from their employers or file IT returns. So such individuals can choose term deposit loan which requires no income proof documents or tax proof.

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14 Differences: Personal Loan Vs. Overdraft Against Fixed Deposit

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There are multiple options to get personal loan in India each different from the other. The options are as follows:

  • Regular personal loan
  • Loan against fixed deposit
  • Loan against shares or mutual fund
  • Loan against LIC policy and others

And in this article, we’ll compare two most widely used options: regular personal loan and overdraft against fixed deposit (or loan against term deposit).

Type of loan (secured and unsecured):

Money kept in FD acts as a security when taking loan against it. So this is a secured type of loan. Whereas personal loan is an unsecured loan since borrower does not have to keep any type of security with the bank.

Application process:

In case of conventional loan, banks follow a lengthy and time consuming process before granting the approval. This includes filling application form, verification of address, income, employment details by the banks, and few others. But in case of overdraft loan, there is no need of address verification as banks already have this detail. Moreover income or IT return proof is not mandatory in case of overdraft loan. As most of the other details are already with the bank, no re-verification is required.

Processing time:

FD loan is processed at a faster pace compared to regular loan which is more time consuming.

Loan amount:

There are multiple criteria taken into consideration when loan amount is decided. But the two main criteria in case of personal loan are – income/salary and CIBIL score. But in case of overdraft loan, amount is dependent on the fixed deposit amount kept with the financial institution. So you can get high loan amount in case of personal loan but not in case of OD loan.


In case of regular personal loan, financiers ask for various documents such as income proof, bank statement, IT returns, address proof, ID proof etc. in addition to the application form. In comparison, when you take loan against term deposit, very less documents are required. This includes pledge/lien letter, deposit receipt/certificate, and few others.

Must read: Consequences of submitting fake income documents for personal loan.

Interest rate:

Higher rate is charged by the bank when granting a regular personal loan and is typically 16% minimum to as high as 24%. But in case of personal loan against fixed deposit the rates are lower but minimum 2% higher than the interest offered on FD. So FD offering a 9% interest can offer loan at 11% which is lower than a normal loan. The reason for high interest is that, a conventional loan is an unsecured loan i.e. financial institutions do not demand pledging any security. So the risk of granting money remains high till its closure. But overdraft loan is a secured loan in which FD acts a security with the bank.

Interest calculation:

When you take term deposit loan, the interest is applied only on the balance loan amount and not on the entire FD amount kept with the bank. In case of traditional loan, interest is applied on the entire loan amount and other factors such as tenure, credit score of the borrower, etc. is taken into consideration.

No credit score check:

Whenever a loan or credit card application is made, banks contact credit bureau (CIBIL) and verify the financial history of the borrower. This process is very important and helps banks in evaluating whether the applicant is credit worthy or not, based on the credit score calculated for the applicant. But while applying for personal loan against fixed deposit, there is no credit bureau check because FD is a security kept with the bank.

Additional reading: Tips on getting personal loan when you don’t have salary slip.

Eligibility criteria:

Anyone aged above 18 years can apply for a loan. But only an individual with FD account on his/her name can apply for loan against FD.

Processing fee:

Every loan application involves human efforts, this is the one of the reason banks charge processing fee. But in case of overdraft loan there is no processing fee charged by many of the banks e.g. SBI and Federal bank. But there are some banks (e.g. Axis bank) who charge a very nominal fee.

No prepayment penalty:

Higher the loan tenure, higher would be the interest earned by the bank and so would be their profitability and vice versa. There is a pre-penalty fee applied if borrower wants to make payment before the standard period and close the account early. This fee is not applied when you want to close the overdraft loan prematurely. For e.g. if the loan tenure is 3 years and borrower wants to close the loan account within 1 year then banks will be at loss because they will not be able to make money, as interest income will stop. This is not the case when taking loan against term deposit, there is no pre-closure charge applied.

Loan application timeframe:

You can apply for personal loan anytime. But against FD, you can apply only minimum 3 months after opening the fixed deposit account.

No need to specify the reason for loan:

While personal loan requires the applicant to specify the reason, the same is not asked when taking personal loan against fixed deposit. So you can use money for any purpose such as travel, buying a vehicle, house renovation etc.

Recovery process:

If you default on loan against FD then bank has right to seize the FD account and recover money. But in case of traditionally granted personal loan, consequences are worst if default continues for a long period. Since the financial institution does not have any borrower’s asset kept as a security, they have nothing to seize. So in such situations banks employ recovery agents or in-house collection department, whose job is to recover money from the defaulting borrower by taking control of their personal assets, calling or personally visiting the house and other means, as per the law.

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5 Ways to Get Personal Loan for Employee of Proprietorship Company

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In an event of emergency, the most sought option to arrange money is personal loan provided all other alternatives such as own savings or help from acquaintances fail to meet the requirement.

However before granting loan; lenders first check the income and the employer’s credibility. If the applicant works in a big company (public or private limited) and meets all other criteria including CIBIL score, salary etc. then approval is quick.

However if someone works in a proprietor firm then it becomes a challenge to get finance. This is because lender also check the credibility of the company applicant works for. Since in a proprietorship company ownership is held by a single person, so risks such as sustainability, turnover etc. always exists. For e.g. if anything unfortunate happens to the proprietor, then the whole business may come to standstill and there will be uncertainty in the job of employees i.e. company may shut down or workers will not get salary and so on. And in such cases, if any employee is granted a personal loan then repayment will become difficult due to no income.

Although there are loans which you can get by keeping securities as collateral with the bank. We would be discussing such financing options in this article.

So how can employee of proprietorship firm get personal loan? There are few solutions as follows:

High income: If the applicant works in a proprietor run company but earns good income which is higher than required by the lender then he/she has higher chance of finance approval. In addition to this, if the company is into business for a long time and profitable too then also the chances of getting personal loan increases. Salary slip and bank statement as required by the lender will help to prove the income.

Against fixed deposit: If the borrower has FD account with the bank then he can get personal loan against this FD at a lower interest rate with minimal documentation. Most importantly lender won’t check the employer’s credibility. This type of a loan is secured as the FD is pledged with the bank. And applicant will get loan amount which is 80% – 90% of the FD amount.

Against securities: Employee from proprietorship firm can also get personal loan by keeping LIC policy, gold, mutual fund, ETF, and savings bonds as a security with the bank. Calculation of the loan amount varies with each financier. Some may have a cap on the amount while others may lend money depending on the market value of the pledged security.

Peer lenders: If all of the above solutions fail then individual working at proprietorship company can apply for personal loan at peer to peer online loan marketplaces. Borrower gets an option to choose the investors (basically money lenders) and at the same time bargain for interest rate. Although every P2PL company has its own eligibility criteria, applicant has vast options to choose a lender. Also called as PTPL, these marketplaces are secured way of getting personal loan and charges are very less compared to banks.

Private money lenders: This option is mentioned but should be avoided as much as possible. Because they take control of your assets such as property or gold or any other till the complete repayment is done. And there are cases of fraudulent activities conducted by these lenders of forging the documents and taking control of the assets. Negative sides of getting personal loan from them is that interest rate charged is very high and recovery process is very bad. Ofcourse there are few benefits such as no credit history check, quick disbursal of money, flexi-repayment option, etc.

Check out pros and cons of private money lenders.

So as mentioned above there are multiple options for employee of a proprietor owned company to get personal loan. Remember to payback all the EMI on time and fully which will help in getting a good CIBIL score.

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Personal Loan for Proprietor: 6 Options to Get Financing

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There are many kinds of business entities in India categorized as private limited, public limited and one person company also called as proprietor firm. Every business owner requires working capital to run their business or for personal use and most rely on taking loan. In case of proprietor based firms, single individual is the owner of the business establishment and has legal rights to own the assets and manage each and every operation.

For a proprietor, arranging money to keep the company functional is difficult as they have to mostly rely on their own money. And due to the risk associated with the business, since dependability is on one individual, lender takes cautious approach to offer loan. Banks do not want to bear a loss if such individual defaults.

So how to get personal loan if you are a proprietor? And who offers financing to the owner of such firms?

Firstly owner will have to get loan on his/her individual capacity since it is an unsecured loan. If you want financing for setting and running small manufacturing plant, service company etc. then there are multiple options to get loan to meet the requirement as follows:

Government loan (Mudra loan): Pradhan Mantri Mudra Yojana, an initiative by the Government of India offers finance to – manufacturing, trading and service sector units in rural and urban areas. These loans are offered by public, private, regional rural, urban co-operative banks, state-co-operative banks, micro finance institutions, non-banking finance companies in collaboration with the government.

Financing below Rs. 10 lakh are offered under Mudra loans and borrower needs to apply at the local branches of these financiers. Then the application will be reviewed and further processing will take place.

Micro finance companies: There are many such companies sanctioning the loan amount on the basis of just the income generating capacity of the borrower, management quality, cash flow, etc. Although micro enterprise gets small loan amount, proprietor or owner of such firms has a good chance to get loan to start or run the business. Every micro finance institution has their own eligibility criteria. For e.g. L&T Microfinance offers loans only to women borrowers, Agora finance offers loans only when applicant produces 2 guarantors amongst other criteria.

Against fixed deposit: If proprietor has FD account with the bank, then he/she can take personal loan against FD. The loan amount in this case is typically 80%-90% of the FD amount kept with the bank. Interest rate is also low as borrower is pledging FD as a security with the bank and most of the banks do not charge extra for prepayment closure. Almost every bank in India offers such kind of financing. Your FD investment remains intact.

Against securities: Another way to get personal loan for proprietor is by pledging securities such as mutual fund, equities, life insurance policy, exchange traded funds and savings bonds. Loan amount in this case is calculated depending on the type of the security kept. For e.g. in case of mutual fund/shares; loan amount is 50% of the current value. If you pledge insurance policy or bonds then there is a minimum and maximum amount cap which differs for each bank.

Against property: Another option for a proprietor to meet personal or business goal is by taking loan against property (commercial or residential or land). Property is kept as collateral with the bank. Instead of selling and arranging money, proprietor can mortgage property get personal loan against it. If tenure is short term then such loan should be taken. The cost of loan is low due to lower interest and amount which is nearly 50%-60% of the property value is given. And during the tenure of the loan, property cannot be sold/rented.

Loan from banks: This is a traditional option for a proprietor to apply for a personal loan at a bank. However lender may be hesitant to approve the loan because of the risks involved as there is no security or guarantor. This is the reason lenders have strict eligibility criteria before processing such applications. For e.g. ICICI Bank offers personal loan to proprietorship firm but with following eligibility criteria:

Minimum turnover of Rs. 40, 00,000 for non-professionals
Minimum profit after tax should be Rs. 2, 00,000 for proprietor firm

Likewise every bank has its own criteria for approval.

Remember, if loan application is completely genuine, business is conducted with fair practice, honestly, with complete transparency, and proprietor has a good credit history with excellent repayment history (if any) then there is always a good chance to get loan.

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19 Banks offering Personal Loan to Bank Staff (Retired Pensioner)

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Retired bank personnel (or pensioners) require money for meeting basic necessities during their golden years. Bank employees especially from government organizations make some kind of investments during their working career so that they get sufficient corpus in order to meet basic necessities. In addition to this, many individuals receive pension after their retirement.

However the corpus may not be sufficient if any emergency arises. Either they will have to use their personal savings or ask money to their children or acquaintances.

In such situations, personal loan for bank employee is a good alternative to get money and meet the necessities.

However any lender would first ask for income to evaluate credit worthiness and calculate loan amount that can be granted. Assuming post retirement, individual does not have income getting a loan is difficult and also the age factor can create hindrance. Most banks have a maximum age limit which is typically 60 years.

So how can bank employee get personal loan? There are many banks offering personal loan to pensioners (i.e. who are drawing pension from the banks where they were working). This also includes retired bank employees. The table below also shows age limit and loan quantum of the pension holder.

Name of Bank or FinancierAge Limit (at the date of maturity of the loan)Maximum Loan AmountRepayment Term
Union Bank of IndiaAbove 70 years allowed2 lakh3 Years
Canara BankAbove 65 years allowed4 lakh5 years
Syndicate BankOver 70 years1.50 lakh6 years
Indian Bank78 years6 lakh5 years
Andhra BankNA4 months pension5 years
Bank of IndiaAbove 75 years allowed1 lakh5 years
Allahabad BankAbove 65 years allowed1 lakh4 years
Punjab National BankAbove 75 years allowed7.50 lakh2 years
Dena BankMax. 80 years1.50 lakh3 Years
Oriental Bank of CommerceMax. 75 years5 lakhNA
Central Bank of IndiaAbove 75 years allowed2 lakhNA
United BankMax. 75 years10 LakhNA
Tamilnad Mercantile BankNAUpto 95% of one month pensionNA
Bank of MaharashtraUpto 73 years3 lakh5 years
IDBI Bank75 years5 lakh5 years
Vijaya BankMax. 72 years2 lakh5 years
South Indian BankUpto 55 years25 lakh15 years
UCO BankNA4 lakh3 Years
Corporation BankNAUpto 10 months NET Pension5 years

In the above table; age shows the maximum age on which loan matures.

Other options to get loan are:

Personal loan against fixed deposit: If retired bank personnel has fixed deposit account in the bank then he/she can get personal loan against FD. The quantum of the loan amount is typically 80%-85% of the amount kept in the account. The biggest benefit is that interest rate is low.

Against securities: Personal loan against mutual fund, gold, shares, insurance policy is another cheaper option to get loan. Borrower will have to pledge any of these assets with the lender and get loan against it. Since this is a secured loan, the interest rate is low.

Peer to peer lenders: Another emerging option to get loan is from peer to peer lending (P2PL) companies. Their eligibility criteria are different than banks.

Features of personal loan given to pensioners (including bank employees):

  • No processing fee by most of the banks
  • Loan amount is small since risk is high for the lender
  • Loan can be used for any purpose
  • Age criteria is relaxed compared to private banks such as ICICI, HDFC and others who have strict limitation
  • Not all banks ask for guarantor or security

From where should bank employee get personal loan?

Bank staff should keep in mind that more the money saved in their golden years, better would be the life. So first thing to do in order to meet emergency requirement is use own saving as much as possible and then take personal loan for the remaining amount required.

Always go for low interest loan. One way is to get personal loan against fixed deposit or securities. These loans are offered at lower interest rate compared to traditionally applied loans.

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10 Alternatives to Get Personal Loan with No Salary Account

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It is a very common scenario in India, employers do not create salary account in the bank for their employees, and salaries are paid in cash, due to whatsoever reason.

Although for an employer it does not create problem, but for an employee it is a big trouble especially when they approach lender for any type of loan (personal, home loan, car loan etc.) or credit card. Bank statement showing salary paid by XYZ employer or salary slip is the widely used document proof to verify the income of the applicant.
So can someone get personal loan without salary account or pay slip? Answer is YES but the process would be troublesome. But it is worth doing, because non-availability of these documents will make impossible for any lender to evaluate credit worthiness of the borrower and calculate loan amount.

Listed below are the options for working professionals wanting to get personal loan but having no salary account.

1) Provide salary slip: Although salary account is not available, you should ask for monthly salary slip from the employer. Pay slip is most valid document showing income of the working professional. And lenders will typically request last 3 months salary slip. However if the employer doesn’t even provide pay slip then read on following options.

2) Show cheque: Although you do not have salary account but if you are receiving salary through cheque, then it should not be a worrying factor when applying for personal loan. Take photocopy of last 6 months cheque and submit these as a proof. Cheque will ideally have payer’s name and signature and should ideally be accepted. This should be sufficient to justify the income and get personal loan with no salary account.

3) Provide statement from another bank account: If salary is paid in cash and you are depositing the cheque or cash given by the employer periodically, then bank statement of last 6 months will be helpful.

4) Get official letter from employer: If salary is paid in cash or cheque, then request for an official letter on employer’s official letter head bearing signature and stamp stating that salary of XYZ amount was paid in cash. Letter should ideally have amount, name of employee, date of salary, signature, and stamp of the authority from the employer’s end. Although loan providers won’t accept this, but still give it a try.

5) Show offer letter: Employee typically gets offer letter before getting a job containing salary breakup. You can use this as a supporting document in addition to the other document listed in this article to make your application stronger.

6) Income tax return: If you are regular tax payer then the recent IT return can be produced as an income proof. It is an officially acceptable document for a self-employed individual.

7) Personal loan against fixed deposit: Having an FD account with the bank is another way to get personal loan without salary account. Only requirement is that borrower needs to have FD account with the bank and depending on the amount lender will give loan amount which is 80%-90% of the amount kept. So higher the amount, higher would be the loan granted. Other benefits of loan against FD are no income proof required, less documentation, and low interest rate compared to traditional option.

8) Loan from peer to peer lenders: Also called as online marketplaces for loan, borrower gets an option to choose lender (individuals) who are ready to offer loan at lower interest. There is no middleman (i.e. bank) in the process and peer lenders differ from bank in many aspects. However they do ask for income proof but may accept proofs such as bank statement or cheque.

9) Personal loan against securities: Do you know that personal loan can be granted by keeping securities such as mutual fund, LIC policy, and gold with the lender? Since your belongings become security, loans are approved with minimal documentation and not very strict eligibility criteria. The benefits mostly remain the same as loan against FD along with no income proof requirement criteria.

10) Ask employer to provide personal loan: Despite of trying all the above mentioned options, if the personal loan application still gets rejected due to lack of income proof document, then ask your employer for a personal loan. Many employers in India offer personal loan to their employees at a lower interest rate. There would be no income proof required as they are ones issuing salary to you. You can also explain the need of money and options you have tried to get the loan.

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7 Options to Get Personal Loan against Cash Salary

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One of the most basic requirement for personal loan is pay slip. However in India, there are many employers offering salary in cash and that too with no salary account. This becomes a big problem for individuals requiring personal loan as lenders ask for salary slip in order to verify income and evaluate credit worthiness and loan amount. And non-availability of this document may result in loan application rejection.

So can you get personal loan against cash salary? Answer is YES. Here’s how:

Produce Income Tax Return: If an individual does not have salary account and files income tax every year then he/she may produce latest income tax return to the lender for verification. IT return with computed income is also considered a valid eligibility document. Lenders can evaluate whether the applicant is credit worthy or not and calculate loan amount based on this document.

Submit Bank Statement: You can get personal loan with cash salary and even if you do not have salary account but have a normal savings account in which you deposit money every month on a fixed date then it may help you to a large extent in getting personal loan. Ofcourse there are many other eligibility criteria to get the application approved apart from income proof. Lenders may ask you to submit bank statement of minimum 3 months or more.

Official letter from employer: In addition to the above mentioned two documents, if you can ask your employer to provide authorized document with signature on company letter head stating salary paid in cash then it your application will get little more weightage.

Offer letter: Working professionals typically get offer letter showing salary. However offer letter can act as an additional verification document. But solely on the basis of offer letter, you will not get loan.

If none of these documents work then employees getting cash salary can get personal loan through following two options:

Personal loan against fixed deposit: If you have sufficient funds in your normal bank account, then you can open FD and take personal loan against it. The loan amount in this case would be 80%-90% of the FD amount. Few advantages are – no income proof required, low interest rate and minimum documentation.

Personal loan against securities: You can also borrow money from lender against LIC policy, mutual fund, gold, shares, and property. In this case, investor has to pledge the documents as security to lenders such as public sector or private sector banks, finance companies offering loan. This option of getting a loan also provides advantage of low interest rate.

Loan from peer to peer lending: Another convenient option to get personal loan against cash salary is P2PL – peer to peer lending. These online marketplaces lets borrowers borrow money at lower interest rate from individual investors (basically lenders). Borrowers have an option to decide the interest rate.

Since personal loan is an unsecured loan, a loan taken against mutual fund/shares/fixed deposit is considered as a secured personal loan and hence lower interest, as the risk is lower for the lender. But in case of payment default, lenders have complete right to send a signed request fund from respective authority. The request contains transfer of the units and sending the proceeds / cheque to the lender. Same holds true while taking loan against FD. Lender will recover money from the FD account.

However remember that not to fake any document for getting any type of loan including personal loan. This mistake can even land you in jail or invite legal case against you.

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No Salary Slip? 3 Ways to Get Personal Loan & Gather Income Proof

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In India, employers often make salary payments through direct credit in the bank, cheque, or cash. And not every company gives pay slip or salary slip at the end of each salary cycle due to whatsoever reasons.

For individuals who get salary directly credited in account every month, getting a personal loan is not very difficult (provided they meet all other criteria) since they can show bank account statement or salary slip as an income proof.
But those who get salary in cash or no pay slip can have problem when seeking any type of loan or credit card. This is because lenders ask for pay slip or bank statement to verify the salary and evaluate credit worthiness of the applicant. And in case of non-availability of these documents, lenders have no way to verify and the application may even get rejected.

So in such cases where salary slip is not provided by the employer, how can an individual get personal loan?

Listed below are three options to get personal loan when no salary slip or income proof is available:

Against FD: If you don’t get pay slip then opening a fixed deposit account and taking personal loan against the same is recommended. The money kept in FD will act as a security and lenders offer loan amount which is minimum 85% of the FD amount. Since this is a secured loan, the interest rate is on a lower side compared to traditionally taken personal loan, which is an unsecured loan.

Against Securities: Another type of secured personal loan is against securities. You can keep LIC policy, mutual fund, shares, gold, and few others. The biggest benefit of such loan is that banks charge interest only on the money which is utilized and not on the entire loan amount. Similar to loan against FD, interest rate is on a lower side for this option. Loan amount depends on the value of the securities.

Both the above mentioned options requires no income proof or salary slip.

You can also get personal loan against credit card.

Private Money Lenders: Although this option is not recommended because of high interest and bad recovery process, they should be considered as a last option, if the money required is urgent. These lenders are basically local money lenders (not all are government approved).

How you can still gather proof?

If you are getting salary in cash on a specific date and you deposit the whole amount in your bank account then you can show your passbook entry or bank account statement as a proof to the lender while applying for a personal loan. Bank statement of 1 year is a valid financial document to show your income.

Ask for a letter from your employer stating that salary has been paid in cash on a particular date. This may help to a certain extent. Especially co-operative bank can consider your application, as their eligibility criteria are not very stringent.

IT return statement: If you are filing income tax return every year then it can act as a best proof for getting a personal loan.

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Fake Salary Slip/Documents for Personal Loan: 6 Dangerous Implications

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You can get financing for anything – medical expenses, marriage, child’s education, buying car and house, etc. And personal loan is the most ideal choice of borrowers. There are plenty of lenders out there in the market to attract potential customers with various offers for loan. Anyone – salaried, self-employed, businessmen, and others can get loan.

However income proof of the borrower is the most important document required by the lender before approval. Borrower’s monthly/annual income plays a key role in evaluation of credit worthiness. And for the lenders to verify the income stated while filling up the application proof, of the salaried or self-employed individual, monthly salary slip, IT return or bank statement is the only document.

However many employers in India still offer salary in cash. So for such employees, getting a personal loan becomes extremely difficult. This is because, lenders have no way to verify the source of income. In some companies or freelancing jobs, individuals are not given salary slip, which again creates problems when applying for a loan.

And it is very common scenario that borrowers generate fake salary slip and other documents such as bank statement, IT return, Form 16, duplicate PAN card etc. to get a loan. This also applies to individuals who are earning low salary as well. Applicants use software to generate fake documents easily. But forging the documents comes with unforeseen risks.

Additional reading: Personal loan for low salaried person.

And borrowers are not aware of the implications of providing fake documents for getting any type of financing including personal loan. And most importantly they are unknown of intelligence used by the banks to identify genuine loan applications.

Here are the implications of fake salary slip for personal loan:

Legal prosecution: If someone manages to fake pay slip and get loan, then lender has complete authority to take legal route if this is cross verified. And if this happens, future will be at risk. And probability is extremely high that no employer will offer job in the future. If forging the documents go unnoticed at the time of application verification and someone managed to procure loan but later that person fails to repay loan then lenders can take legal route and confiscate bank account or other property and criminal proceedings will follow. The borrower may even end up in the prison and the whole life will become miserable.

Lose employer’s trust: If lender verifies applicant’s income from his/her employer then it can put the trust at stake and may also result in job loss. And getting a new one will become difficult, as you may not get experience letter or relieving letter from the existing employer.

Credit score downgrade: Such frauds will straightaway result in downgrading of credit rating.

No bank loan in the future: Because of credit score downgrade, no lender will offer financing or credit card in the future.

Immigration problem: If criminal case is booked then moving out of country will become impossible. Most countries ask and verify criminal case on the visa applicant’s name. If you do not have passport, then getting the same will be problem.

PAN card blacklisted: Most importantly, PAN card may get blacklisted for the life. And getting a new one will be impossible.

Remember that faking anything in today’s world is illegal. One mistake can ruin the life.

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8 Employment Requirements for Personal Loan Considered by Banks

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Need of money can arise at anytime. It can be due to a medical emergency, purchase of important stuff, and many others. And at such times, individual make use of own savings or take monetary help from friends/relatives.

But what is the solution when the above mentioned two options are not possible/sufficient to meet the demand for money?

In such scenarios, personal loan can come to rescue.

However these days, loan approval process has become very strict and banks make a rigorous verification check before approving any type of credit. This is because, rising default cases (non-performing assets) affects the profitability of lenders. However for a working professional getting a loan is not a cup of cake, since income is what they have to prove credit worthiness.

Personal loan is granted / rejected not on the basis of a single factor i.e. income and credit score. And each application is reviewed minutely and multiple factors are given importance and evaluated to judge credit worthiness of the applicant.

Listed below are the employment requirements for personal loan (apart from credit rating) considered by banks, on a case to case basis, before granting loan to a salaried working professional.

Income: This is the most important eligibility criterion considered by the lenders that helps in evaluating the credit worthiness of the applicant. Higher the income, lower would be the chance of default. Lower income means the borrower may default the loan and is risky for the lender.

Company: If the applicant works in a big company then chances of credit approval are high. So someone working in companies like HCL, TCS, Infosys, and others have higher chance of approval.

Employment Status or Type: Amongst various types of job categories (full-time, part-time, contractual and others), employees with full-time job are a safe bet compared to part-time or contract workers. This is because permanent full-time employees typically have a regular income. Although irrespective of the job type, your pay slips is always verified by the lender.

Salary Type: Another employment requirement for personal loan in India is how the applicant gets the salary. In India, depending on the company, salaries are paid either in cash, direct credit in the account, or cheque. Salary in cash is considered very risky as there is no documentary evidence proving that money was paid by the employer. Whereas online transfer or cheque requires no additional proof as the name of employer providing salary is clearly visible. Typically salary in cash is given by proprietorship based companies or small sized industries/shops etc.

Employment history: If you keep on switching a job frequently then in the eyes of lender you are unstable when it comes to job. And lenders will assume that you will change jobs frequently in the future as well or might not even have a job.

Job role: Certain jobs where risk to human life is high is also given importance by the lender. For e.g. being employed in chemical company, fisherman, firefighters, coal miners, bodyguards, and others have risks to the employed. So risk to the life of borrower is also a risk to the lender. Because in case of any unfortunate event to the borrower, loan repayment will take a hit.

Low work experience: You might have faced the cons of low work experience in career. But loan request can also be denied because of less experience. So atleast have 1+ years of experience and then apply for job. If this is not possible, then a professional degree from a reputed institution can help you in loan approval.

Position: Individuals at a higher position are prime customers for any lender because of assumed high salary. Your position gives additional weightage to the application. But opposite is the case when a junior person applies for a loan. Chance of rejection is high.

However remember that if credit score is poor then none of the above listed factors may work in the applicant’s favor. Higher credit score means applicant has been a loyal borrower in the past. And lower rating is a sign of defaulter, which means he/she will continue to be a risky customer for any lender.

The above factors are typically considered by private and public sector banks.

But what can be done if personal loan is rejected due to any of the above mentioned employment requirements or any other reason?

There are other options available to get a credit as follows:

Co-operative banks: In comparison to public and private sector banks; eligibility criteria of co-operative bank is not strict. Moreover interest rates are low. But at the same time, loan amount is small.

Peer to peer lending companies: Also called as P2PL or PTPL, there is no bank involved between the borrower and lender. Individuals are lenders in case of PTPL. Borrowers can choose from multiple lenders and at the same time it is upto the lender to decide who to borrow money. Low interest, quick disbursal, and faster processing make these online marketplaces for loans an attractive option. Read about differences between P2PL and banks.

Against fixed deposit: One of the best recommended solution to get personal loan is against FD. If you have FD account with the bank then you can keep it as a security and in return bank will offer loan which 80%-90% of the FD amount.

Against securities: Very few people are aware of getting personal loan against securities such as gold, mutual fund, LIC policy and few others. Biggest advantage is that banks charge interest only on the money which is utilized and not on the entire loan amount.

So as you can importance of your employment plays a key role in personal loan approval process. Irrespective of the loan you take, remember to pay EMI on time and fully. This will help in building a good credit history.

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