21 Personal Loan Schemes ESPECIALLY for Housewives/Women

Everyone has a dream or wishes to fulfill. It could be starting a business, expanding existing business, renovating house, buying appliances, etc. Although an individual can use his/her saving to fulfill the need, it is not possible for everyone to achieve their dream mainly because of lack of finance. Although there are lenders offering personal loan but getting financial assistance is difficult especially for housewives with no income since they carry high credit risk to the lender.

However in order to give confidence to women by helping in building a business, various schemes are available in the market offering personal loan for housewives. These credit schemes are especially designed for women and many of these sponsored by the government only.

Name of Scheme / LoanWho Offers?Purpose of Loan
Mudra Yojana (3 Schemes - Shishu, Kishor, Tarun)Private and public sector banks, Regional rural banks, Scheduled union co-operative banks, Scheduled state co-operative banks, Micro finance institutions (MFIs), NBFCs, societies and trusts.Refinancing to micro business
Star Mahila Gold Loan SchemeBank of IndiaPurchase of gold jewelery or coins
Can MahilaCanara BankGeneral purpose
V SwashaktiVijaya BankSetting up small business
Sakhi ShaktiIDFC BankMeet financial needs
AB Vanitha Vahan SchemeAndhra BankPurchase of 2 or 4 wheeler
Secured Gold LoanShri Mahila Sewa Sahakari Bank LimitedFor general purpose
ShringaarBhartiya Mahila BankSetting up beauty parlor
AnnapurnaBhartiya Mahila BankSetting up food catering business
ParvarishBhartiya Mahila BankSetting up day care center
Kitchen ModernizationBhartiya Mahila BankMainly but not limited to renovating kitchen
Mahila Udyam Nidhi SchemePunjab National BankSetting up small scale industry
Mahila Samridhi YojanaPunjab National BankPurchasing and setting up of internet cafe and other small businesses
Kalyani Card SchemePunjab National BankAgricultural and non-farming activities
Stree Shakthi PackageState Bank of IndiaSetting up entrepreneurial business
Dena Shakti SchemeDena BankStarting business in select industries
Udyogini SchemePunjab and Sind Bank and Karnataka State Women’s Development Corporation (KSWDC)Starting business in select industries
Annapurna SchemeState Bank of MysoreSetting food catering business
Cent KalyaniCentral Bank of IndiaStarting a new business/expanding or modifying an existing business
Stand-Up India SchemeICICI BankSetting up a greenfield enterprise in select sectors
Mahila Vikas YojanaOriental Bank of CommerceStarting small business

But each come with their own eligibility criteria especially the purpose. Meaning, you cannot avail a loan meant for purchasing a vehicle for starting a business.

Good read: Ways to earn money from home especially for housewife

Other options for homemaker women to get personal loan

In addition to the above mentioned loan schemes for housewife, there are following four options to get personal loan:

Against Fixed Deposit:

Personal loan against FD account is another cost saving option to get a loan. If homemaker has some amount then she can open fixed deposit account and get loan against it. The interest rate charged is very low compared to traditionally bought loan. Almost every bank offers financing against FD. In this case, the FD becomes security.

Against Gold:

If homemaker women has gold jewelry then she can take loan against it. She will have to keep the gold as a security with the bank which will remain in their custody until the loan is fully repaid.

Against Securities:

Similar to gold and term deposit, housewife can keep securities such as life insurance, shares, mutual fund and avail personal loan against the same.

Private Money Lenders:

Although this option is never recommended due to the risks involved but there are trusted money lenders as well offering loans at higher interest and returning the security kept with them.

Personal Loan: 7 Most Important FINANCIAL Documents Required

Credit is basically a financial agreement between the borrower and lender (banks in most of the cases) in which lender offers money to the borrower to meet his/her objective which could be buying home/car/house renovation/bike/personal. In return, creditors charge interest and certain other fees from the borrower. Loaner may also ask to keep some form of security from the loanee i.e. the borrower in their control until the loan is fully paid-off.

Since crediting is the most profitable earning source for any lender, the market is flooded with numerous financiers ready to offer you money for almost any purpose. Check your E-mail inbox or SMS to verify this. You’ll definitely see a lot of marketing messages offering your credit card, loan (personal, car, home, etc.) within a day.

However many of these messages are actually marketing gimmicks. Because any type of credit application goes through a rigorous verification process till the money is received by the applicant (salaried or self-employed).

Few of the procedures involved are:

  • Application form submission
  • Documents submission to the lender
  • Documents verification by the lender
  • Credit bureau check by the lender
  • And others on a case to case basis

In this article, we’ll discuss about the 6 most important financial documents asked by the loaner for personal loan without which getting any type of finance is almost impossible for salaried and self-employed individuals.

Financial Documents Required by Salaried Individuals

Pay Slip: No other person than a salaried can know importance of the salary slip. Whether he/she is applying for a job, any type of loan or credit card, non-availability of this proof will give sleepless nights. And especially getting finance will become next to impossible. Although there are ways to get loan without income proof document.
Based on the income mentioned in the pay slip, application is processed further and loan amount is decided.

Typically lenders will ask for last 3 months pay slip. However submitting salary slip is just the first step, lenders will then cross verify the authenticity of the document submitted:

  • Employee details verified: Salary amount, PAN, designation, provident fund number, official employee-id, issuance date of salary slip, bank name in which salary was credited and the respective account number.
  • Employer details verified: Name, logo, signing authority, address, phone number, etc.

Although there are many other factors taken into consideration by the banks such as CIBIL score, age, city, company worked for and so on.

Many people make a mistake of creating fake income proof. However beware that this can land the applicant in a big trouble and even a criminal action can be taken against the person by the company on whose name fake salary slip was created. And most importantly, career will be at risk.

Must Read: Impact of submitting fake documents for personal loan

Form 16: Many people think that Form-16 is required only during filing of income tax returns. But this document is also required while applying for personal loan (in fact any type of loan). Typically total income is checked by the creditor which is obtained by subtracting the deductions from the gross income.

If the applicant does not fall under the tax bracket, then he/she is not required to submit Form-16. Not falling under tax bracket also means, income of the applicant is also low. But poor income does not necessarily mean, personal loan application will be rejected, since your income is the most critical component that decides whether loan will be approved or not. And if approved what amount will be granted.

Check out personal loan for poor salaried.

Income Tax Return: This is not always asked by the salaried individuals and is typically requested when the loan amount is high. This document contains income from all the sources. For a salaried person, income is what is paid by his/her employer. And based on the total income earned, decision on loan approval is made.

Bank Statement: This helps salaried individuals especially who do not receive pay slip and are issued monthly salary in cash or cheque. By verifying the statement, lenders can check monthly amount deposited.

Financial Documents Required from Self Employed

Typically loan application from self employed businessman is high, so lenders ask for different set of documents before granting loan. Self employed also includes doctors, chartered accountant, company secretary, architects, and others.

The documents required are:

Income Tax Return: Similar to salaried individuals, self employed individuals are also required to provide ITR of last 3 years when applying for a personal loan. For this category of individuals, income is profit and gain from the business. And based on the total income reported, lenders decide on loan approval or rejection and the amount.

Balance Sheet: This is the document which specifies the financial health of any company (sole proprietorship/private limited/public limited, others). Through this document, lender can evaluate credit worthiness by checking the cash position, assets and any debts and then decide on personal loan approval and the amount.

Profit and Loss statement: Though many of the information present in balance sheet is also available in a profit and loss statement, but the net profit metric is what is typically checked by the lender in order to evaluate whether it is worth lending money to the self-employed applicant. This metric can be either positive or negative. And obviously a negative number indicates poor financial health. This is the reason last 3 years P&L statement is requested by the loaner, so that they can know what has been the financial health in recent years for better judgement.

Personal Loan against Salary Slip: Details Checked by Lender, Importance of Pay Slip

Whether applying for a job or any type of credit, for a working professional, salary slip is one of the most important document. No other person would know its importance than what a salaried employee does.

But why is salary slip is important for getting personal loan or any type of credit (car loan, home loan, credit card, etc.)?

The answer is – credit worthiness of the personal loan applicant is judged on the basis of income stated in the pay slip. Irrespective of what salary you say to the lender, they will rely only after verifying the pay slip. Although income is not the only eligibility criteria on the basis of which loan application is approved or rejected. But it is certainly the most important criteria considered by major lenders in India. Also the loan amount is also decided on the basis of the income of the salaried person.

Although there is a minimum income requirement but there are lenders offering personal loan to low income earners. And higher the income, higher would be the chances of credit approval since repayment capacity of the individual is assumed to be good since the income is good.

Check out getting loan from co-operative banks when your income is poor.

What details financial institutions check in a salary slip?

Apart from your gross or net income mentioned in the payslip, banks or any lender check for:

  • Authenticity of the document: This is cross checked by the company logo, signature and/or stamp of the person issuing the slip. Typically this person is from the human resource department of the employer. In many cases, if the pay slip is computer generated with no official signature, then lenders check for the company name, logo, address, phone number, etc.
  • Details of the recipient: That is, on whose name the slip is generated, designation, employee code (if available), location of work, provident fund number, PAN number.
  • Other details: Date issued, duration of the pay i.e. days worked, name of the bank in which salary was credited and the bank account number, joining date. If the applicant is experienced and has recently a new company, then income slip of the previous company is also asked.

Typically lenders ask for last 3 months slip. In some cases, bank statement for the last 3 months are also requested.

Non-availability of the document may result in rejection. However there are ways to get personal with no salary slip or income proof as follows:

  1. Against Fixed Deposit
  2. Against Securities
  3. Private Money Lenders

If you do not have pay slip and don’t want to go with above listed three options, then you can ask request bank by providing:

  1. Photocopy of the salary cheque: In India, there are many companies who give monthly cheque to their employees. If this is the case, make sure you take photocopy of the cheque received each month. This will act as a proof to validate that you are receiving salary each month, though in the form of a cheque.
  2. If income slip is not issued and employer directly deposits the monthly salary in the bank account then provide bank statement showing salary credited with the employer’s name.
  3. Offer letter showing salary details
  4. If you were employed earlier and recently joined a new job then show pay slip from the previous employer. This combined with the above 3 option should make your work done.

Lastly remember that approval or rejection is at the sole discretion of the lending company. And most importantly, never provide fake salary slip or income documents, as it may land you in a legal trouble and create problem in your career in the future.

3 Low Cost Alternatives for Getting Personal Loan

Life is uncertain and so is the financial situation. You never know, when the need of money would arise. For e.g. circumstances such as medical emergency – which is unpredictable or wedding expenses which are predictable but unavoidable and in fact is a burden on most of the families.

So the first option that comes to mind when you want to meet your expenses is the personal loan by approaching the bank especially larger ones. However there are benefits when it comes to getting a loan from bank but there are certain cons as well as listed below:

High interest rate: The most important factor in a personal loan is the interest rate. Since such loan are mostly unsecured, the interest rate charges by the private banks is high. The reason behind the same is the high risk. In case of default, banks have to bear losses since money granted by them is not paid by the borrower. This adds as a negative mark on their balance sheet.

Interest is charged on the full amount: Even if part of the loan is repaid, the interest is charged on the full amount.

CIBIL score: It is quite obvious for anyone to check the repayment capacity of the applicant. And the same rule applies with the bank. In order to validate the credit worthiness, they gather financial history data of the borrower. And based on the records fetched from the bank, they calculate the score.

Strict eligibility criteria: Considering the risks involved, almost every bank has strict eligibility criteria. And the most important is the income of the applicant. Higher the income, higher is the chance of approval and so is the quantum of loan. Although there are loans for low income earners but the other terms and condition makes the process cumbersome.

Lengthy documentation process: Documents required for personal loan are many. This includes pay slip, bank statement, income tax return, business presence proof, to name a few.

Time consuming process: Although every bank claims to provide approval within 48 hours or even earlier, the actual time taken to get the money is quite high. So someone in a emergency has to face tough time till money is received.

Various charges: In addition to the interest rate, there are additional fees charged by the bank such as processing fee, cheque bounce charges, etc. This further increases the actual cost of getting a loan.

So how to save money on high interest personal loan?

Ofcourse there is no harm in asking for money from your relatives or friends. But everyone has their own problems in life and may not be able to help you out completely. These days, there are multiple low cost alternatives to get personal loan.

The options are as follows:

Peer to Peer Lending: Also called as P2PL, these are online marketplaces for personal loan. Various lenders (basically individuals) are ready to offer loans. Borrower has multiple choices to choose the lender and bargain on the interest rate too. The interest rate charged is less compared to banks. And so is the eligibility criteria and documentation process.

Few of the prominent players in the P2PL space in India are – Faircent, i2iFunding, LendenClub, Lendbox

Co-operative Banks: When someone wishes personal loan, he/she first approaches bigger banks such as State Bank of India, ICICI Bank, HDFC Bank and others. These banks typically charge a very high interest. However there are certain categories of banks called as co-operative banks which offer personal loan with low amount and at a low interest rate. Explore in more detail about personal loan from co-operative banks. In addition to low rates, the eligibility criteria is not very strict.

Secured Loans – Against Fixed Deposit / LIC Policy / Equities / Mutual Fund, others: Not many individuals are aware of getting loan against all the mentioned securities. Since it is a secured loan, the interest rate is naturally on a lower side.

Get Rs.10000 Personal Loan for 45 Days @ZERO Interest from ICICI Bank

The money earned through interest income makes your bank rich be it through credit card, personal loan, home loan, car loan, etc. And the most painful is the interest paid on personal loan, which is a money minting machine for all the lenders, irrespective of the amount of credit granted. Because the interest rate charged by the bank is huge, especially when the loan is taken without any collateral. And if the borrower takes credit against collateral then the rate charged is on a lesser side. In any case, personal loan is the most expensive.

Understanding the pain caused, ICICI bank (India’s largest private sector bank) in partnership with Paytm (India’s largest mobile payment app) is offering digital credit (i.e. personal loan), which is interest free, to its customers using Paytm app. This is basically a short term small loan.

The product is called Paytm-ICICI Bank Postpaid

Loan is not granted to everyone. Real time credit behavior i.e. financial and digital behavior is assessed based on which credit is approved within seconds. Here are more details on the digital personal loan (or credit):

  • Minimum loan amount: Rs. 3,000
  • Maximum loan amount (digital credit): Rs. 10,000
  • Interest rate: ZERO interest for 45 days
  • No documentation
  • Instant approval
  • No processing, pre-closure charges

What if repayment is not done within 45 days?

The penalty is very small i.e. a late fee of Rs. 50 will be charged and interest rate of 3% will be applied. Repayment can be done through Paytm wallet, debit card, or internet banking of third party bank.

Eligibility criteria but not limited to:

  • He/she should be ICICI Bank Customer
  • Must be using Paytm App for shopping
  • Paytm app should be linked to ICICI Bank account
  • Should have good credit score

Where can you use the money?

There is no condition on the using the credit money. Borrower is free to use money for any purpose such as making bill payments, flight booking, buying movie ticket, and so on.

Who should use such credit facility, if eligible?

  • First time applicants with no credit history
  • This is best recommended for individuals (especially salaried) who want to pay their utility bill in the first 5 days of the month but are receiving salary late. Once they receive the salary, repay the loan.
  • Small business owner or self-employed: There are many businesses in India which still run on credit mode i.e. date of receiving money is not fixed. However such individuals have to pay various bills in the first week of the month in order to keep the business running. So for such individuals, this zero interest loan is worth recommended.
  • It is also ideal for shoppers who want to earn cashbacks

How to avail more credit?

It’s simple. Make repayment on time and fully and you can avail loan amount of upto Rs. 20, 000.
In case of default, the loss would be for the ICICI bank and not Paytm.

9 Types of Collateral to Get Personal Loan: FD, Shares, MF, Gold, NSC, KVP & more

Financial emergencies can strike anytime. And not everytime your own savings or friends can come to fulfill your requirement. In such cases, personal loan is the best and the only solution.

When any individuals want to take personal loan from any financial institution for his/her financial requirement, there are two options:

  • Against Collateral
  • Without Collateral

Collateral means pledging your assets/belongings as a security with the lender and get finance against them. Getting a personal loan without collateral is expensive for the borrower because of high interest as the risk is high for the lender.

Opposite is the case when taking loan against collateral. The interest rate is low and so is the risk to the lender. Most importantly, the credit score is not an eligibility criteria in most cases and the processing is quick compared to overdraft without collateral.

There are many types of collateral’s lenders accept in India. And here is the list of collateral’s borrower can pledge and get personal loan against them:

Fixed Deposit: If an individual has fixed deposit account in his/her name, then you can get personal loan against FD. The loan amount is around 80%-85% of the FD amount kept with the bank. Important point to note is, you cannot get loan whose tenure is greater than the FD tenure. The interest rate charged by the bank is higher than the FD interest rate offered but lower than the traditionally bought personal loan.

Shares: These are also called as loan against securities. If you are an equity investor then you can pledge your shares with the bank and get overdraft loan against it. The loan amount depends on which scrip it is, the previous day’s market value of the shares and the quantity held. Interest is typically charged on the amount utilized and for the time span utilized. You can take loan against a single scrip although most banks ask for shares from two different companies. Every bank has pre-approved scrips against which loan is given. Also loan is not granted if the applicant has shares in physical form, in the name of minor, locked-in, partly paid-up shares.

Mutual Fund: Similar to personal loan against equities, you can pledge mutual fund units and get finance against it. You cannot get loan against every fund you own and every bank has pre-approved funds against which overdraft is given. Applicant can have shares and MF units held in NSDL or CDSL. The loan amount is higher for Equity/ Hybrid/ ETF funds and lower for debt or FMP funds. The net asset value (NAV) is used for calculating the loan amount.

Property: Although taking a loan against property is not recommended, but those who are seeking to get it must know that – loan can be taken by mortgaging residential, commercial property (office or plots), or residential plots, schools, hospitals, etc or industrial property. Loan amount (typically 60%-70% of the value of the property) depends on the net present value of the mentioned property. If the said property is jointly held, then all the co-owners are required to become co-applicants of the loan. Mortgaging your property doesn’t mean, you cannot continue using it. You have full rights to use the property.

LIC Policy: The loan amount depends on the surrender value of the policy and is typically 85% – 90% of the surrender value. Most importantly, the borrower should have paid three premiums at the time of loan application. If the loan repayment is not done before the maturity of the policy, then LIC has the rights to get their money back from the maturity amount.

Gold: These are also called as gold loan and the borrower has to deposit gold ornaments with the lender and get finance against it. However the gold remains in the custody of the lender until the loan amount is paid fully. Which means, you cannot enjoy wearing your ornaments. In return, bank guarantees safety for your gold jewelry. The loan amount mainly depends on the carat (18 to 24) and weight of the gold jewelry in grams, tenure of the loan. You can also get loan against gold coin.

Credit Card: Another option to save money on higher interest rate charged and get instant cash, is personal loan against credit card. There is no application required as this type of loan is already pre-approved and typically existing card holders are offered this type of loan. The loan amount in this pre-qualified loan is within the credit limit. However the applicants must have a good repayment history and credit score.

Other types of assets against which you can get personal loan are:

National Savings Certificate and Kisan Vikas Patra: For meeting financial requirements, you can also get loan against NSC or Kisan Vikas Patra (KVP). The loan amount depends on the age of NSC/KVP. Note that NSC/KVP should be on the name of the borrower.

Almost all leading banks in India – SBI, ICICI Bank, HDFC Bank, Axis Bank, etc. and other financial services provider such as Bajaj Finserv, Tata Capital and others offer loan against above mentioned collaterals. And all credit is granted at the sole discretion of the respective Bank or financial services provider and eligibility criteria is different for each lender which mainly include age, income, past financial transaction history, and number of dependents.

4 Ways to Get COLLATERAL FREE Loan for Salaried, Self Employed Business

In India, there are two types of loans – secured and unsecured.

The key differences between the two are – secured loan requires some form of collateral to be kept under possession of the lender (car, land, fixed deposit, etc.) and interest rate is low and risk to lender is high. Whereas in case of unsecured loan, there is no need of collateral or guarantor, interest rate is high and risk of lender is also high. Collateral free loans are given on the basis of TRUST. Borrower is trustworthy or not is decided on the basis of previous borrowing history and current financial status.

Whenever any individual applies for personal loan, guarantor/collateral is typically requested by the lender. In either case, credit score and employment or business status will determine whether loan would be approved or rejected.

Not everyone has collateral to keep in the custody of the lender. So in case of urgency, how to get loans with no collateral in India?

There are four ways to get collateral free loan as follows:

Direct application with the financial institution

Individual can visit the lender directly or apply online. Borrower will have to apply for multiple documents such as income proof, IT returns, employment documents such as salary slip, etc. And based on statistical calculations and credit score, the application will be either rejected or approved. Although individuals with higher income get loan easily, there are loans for low income earners as well, offered by few banks. In such cases, the finance offered is on a lower side.

On the other hand secured loans are easy to get and interest rate is also low. This is because the risk is low since your valuables are in the possession of the lender. And in case of default, lender has rights to take possession of the assets – car, home, land, gold, equities, mutual fund, etc.

Mudra Loan

Micro Units Development & Refinance Agency Ltd. (MUDRA) is a scheme run by government of India. Under Pradhan Mantri Mudra Yojana (PMMY), individual who wants to set up/run micro units – manufacturing, trading and service sector business is eligible to get upto Rs. 10 lakh credit. This loan cannot be granted to a salaried individual and only those who want to setup or run business can be offered the credit. As the name suggests, Mudra loan can be availed only if the borrower is having micro business i.e. where capital requirement is small.

The objective of PMMY is to promote entrepreneurship in India. Under this scheme, there are three categories of loans:

  • SHISHU – Maximum credit of Rs. 50, 000
  • KISHORE – Maximum loan of Rs. 5 lakh
  • TARUN – Maximum loan of Rs. 10 lakh

Peer to Peer Lending

These are online loan marketplaces connects borrowers with multiple lenders. Compared to banks, the eligibility criteria are not very strict and there is no requirement for guarantor or any type of collateral. And borrower has options to choose from various lenders and bargain on interest rates. Until August 2017, they were not regulated by RBI but from September 2017 onwards, RBI decided to regulate it.

P2P platforms check eligibility of the borrowers via credit score check, income, social media activities, and others.

Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)

Businessmen owning micro / small manufacturing, service company, or wanting to setup micro small enterprise (MSE) are offered collateral free loans. The loan amount is upto Rs. 1 Crore. The cash credit can be used by the borrower for working capital, buying assets or expanding the business. In order to be eligible to get loan under CGTMSE scheme, the entity should be either of these – Sole Proprietorship, Partnership Firms, Private or public limited Companies.

Loan for Low Income Earners against FD: Min. Amount 10,000

There are multiple ways to get personal loan in India and amongst all the most convenient option is to invest in fixed deposit and get personal loan against the FD.

This option may not be suitable for everyone. But for low income earners, personal loan against fixed deposit is the best solution. Reason is when a poor income earner, applies for an overdraft loan via traditional way i.e. application and then awaiting for the lender’s reply is time consuming and at the same the result in most of the cases is not satisfactory.

This is because the eligibility criteria for loan are very stringent and applicant has to meet following two main conditions:

  • Income – The most important criteria checked worldwide including India. There is a minimum annual income required to get a loan.
  • CIBIL score – In order to evaluate credit worthiness of the borrower, banks do a rigorous verification check via CIBIL, India’s credit rating agency. Banks get access to the borrower’s past financial transaction history and based on that they calculate the CIBIL score (out of 900). If the score is above the minimum threshold, then applicant has a good chance of loan approval otherwise not.

There are many other conditions such as address proof, employer status, type of job etc. However the above two eligibility criteria are always checked.

But in case of poor earning person – salaried or self-employed; getting a loan becomes difficult because of the first condition i.e. income. Although there are banks offering personal loan to low income earners (requiring monthly income starting from a minimum Rs. 5000), there are denial possibilities because of inability of meeting other eligibility criteria.

Other option is to get loan from co-operative banks having less stricter eligibility norms.

Therefore taking overdraft against FD is most convenient as there are multiple benefits as follows:

  • No income criteria
  • Fast loan disbursal
  • No CIBIL check
  • Minimum documentation
  • Low interest rate compared to traditionally taken loan and few others
  • No prepayment penalty
  • Low processing fee. Some banks do not even charge this fee.
  • Borrower can use the fund for any purpose

Here is the table showing minimum loan amount offered by various banks against fixed deposit:

Financial InstitutionMinimum Loan Amount (Rs.)
Axis Bank25,000
ICICI Bank10,000
State Bank of India25,000
Bajaj Finserv25,000
Kotak Mahindra Bank25,000
Bank of Baroda1,00,000

Few points to take a note of when thinking of taking overdraft facility against FD:

  • You can borrow after a certain period of opening FD account. Typically 3 months is the minimum period.
  • There is no standard tenure of taking loan. However it should not be more than the FD tenure.
  • You cannot borrow more than the FD amount. Typically 80% – 90% of the deposit amount can be granted.
  • Interest is charged only the amount drawn and not on the entire amount kept in FD.
  • If you fail to repay the dues, bank has authority to recover from the FD.

6 Ways to Get Personal Loan with No Income Proof

Digitization has made the process of borrowing money extremely easy. In fact, many lenders claim to approve the loan within hours of application. However there are terms and conditions involved and most important being the income and proof. Every commercial lender will first ask the applicant for the annual income and then ask proof verifying the income – salary slip and income tax return statement.

The reason why income is most important criteria is because credit worthiness of the applicant is evaluated on this basis. There is no other way to evaluate the risk associated with the applicant apart from credit history check, which is not a full proof method.

However not every employer in India provides pay slip at the end of every month due to whatsoever reasons. Or many companies pay salary in cash or cheque. But this creates problem for following category of loan applicant employee when he/she applies for the loan:

  • Salary is paid in cash with no proof showing that it is paid by the company you work for.
  • Salary is paid via cheque but no pay slip is given.
  • Self-employed – earning irregular income with no income tax paid.
  • First time in job
  • Homemaker

So can such individuals get personal loan with no income proof?

Answer is YES. Getting loan is possible (though difficult) with no income documents available.

Here are the options to meet the money requirement:

Ask friends or relatives: One of the best and most widely used alternative to get money at the time of need. This option of borrowing money works completely on trust. What best you can do is give interest to your acquaintance (lower than what a bank charges) in addition to the borrowed money. So borrowing money actually becomes a personal loan. Borrower will be happy as he/she would get more money in return. And in future, can provide you more money, at the time of urgency. Basically mutual trust will further strengthen.

Joint loan: If above solution does not work, then you can request other person to apply for a joint loan (assuming the other person is eligible to get loan). The loan will be on his name. And loan repayment responsibility will be completely on your shoulder. Again this option works on trust. It is similar to supplementary credit card.

Against fixed deposit: One of the best recommended option to get personal loan with no income proof or if applicant is self-employed or student or homemaker, is loan against FD. It is a secured loan, where applicant must have FD account with the bank. And the loan amount is dependent on the money kept in the account. Typically 80%-90% of FD amount is given as the loan amount. This option has multiple benefits such as no pre-payment charges, low interest rate; but 1%-2% higher than the interest offered on the FD amount, interest charged on the used amount and not the whole amount. If you can show healthy balance in your bank account then lenders will automatically offer pre-approved loan by asking you to get loan against fixed deposit.

Private money lenders: This is the least recommended option to get loan due to two main reasons – very high interest rate and bad recovery process. If you are using this option to get a loan, then check out this article containing information on pros and cons involved in private money lenders.

Co-operative banks: Commercial banks (e.g. ICICI, Axis, HDFC & others) will always ask for pay slip to verify the income. However commercial banks have less stricter norms and they do not ask for income documents. In order to get loan, you need to be a member of the bank along with other terms.

Peer to peer lenders: These online marketplaces for loan are other option to explore to get personal loan. You can bargain for interest rate and the eligibility criteria are less strict compared to commercial banks and not everytime you will be asked to produce income documents.

How to convince lenders to provide personal loan when no documents are available?

If you are a genuine applicant and income documents such as salary slip is not available, then you can request lenders by providing following additional documents which will add more weightage to your personal loan application.

Employment offer letter: Even though your company does not offer salary slip, employment offer letter showing currently drawn income may help in some way.

Income proof from previous job: If you had been working earlier where salary slip was given regularly, then keep it handy and submit as a proof. And along with that, you can show offer letter of the current employer showing your salary. Typically, when you switch jobs, income also increases.

Bank statement: To further support above two documents, bank statement showing income from your employer can also be helpful. Statement showing money deposited in your bank account on a specific date of the month is an excellent income proof.

Photocopy of cheque: Many organizations pay salary to their employees via cheque. One of the first thing to do when you receive cheque is to take photocopy and snapshot of the same and then deposit the money in the bank account. Photocopy of cheque is also a good income proof.

Although these documents are not a replacement, but your application will definitely be considered for a review.

Personal Loan against FD: 7 Reasons to Apply

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.