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 or cheque, 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. Since personal loan is a unsecured type of loan, it carries a very high for the banks or any other lender. So the only way to judge genuine applicant with good repayment capacity is through their income proof, employer, past credit history, etc.
So can someone get personal loan without salary account or pay slip?
Answer is YES. But the process would be troublesome. But at the same time, going through the process is worth doing. This is 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 or income proof.
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. Most importantly, take a scanned copy of salary slip, whether you want to take loan or not. This is because if you lose salary slip, then it may create problem in the future.
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. Make a rule to keep a scanned copy of every cheque you receive. This is an excellent proof to get personal loan.
3) Provide bank statement: 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 P2PL, these are 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. Eligibility criteria is also not strict compared to banks. Borrower has option to bargain on the interest rate and choose lender of his/her choice.
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.
11) If you had good credit history then you may naturally have a good chance to get personal loan.
12) Ask your relatives/friend: And last but not the least the most cost effective option to get personal loan is to ask your relatives or friends to grant money. Ideally this should be the first option to get money at the time of need. In return, what you can do is return the money with interest. You and your acquaintance can pre-decide on the interest rate, which should be much lower than what the banks charge. This way your loaner will be at the profit and may grant you money in the future, if you have trusted financial repayment history with him/her.
13) Loan from private money lender: This is not a recommended option because of the risks involved. But still you may give it a try, when all options fail.
Remember – from whomsoever you take personal loan from, always be prudent in making repayments. That is be loyal with everyone and always make full EMI payment on time. Never miss even a single payment. This is the only way to build trust and get any type of credit in the future. Else, no one (bank/peer lenders/your friends/ or any lender) will offer you credit in the future. Loan is completely based on trust be it bank or anyone. Trust lost once, is difficult to get it back.