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.