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.