The self-employed professionals are the ones who are in constant need of money are the ones who can obtain the loans by very much difficulty from the lender. As the self-employed persons do not have any monthly fixed income, it is difficult for the entrepreneur to disclose actual profits, and also, the income keeps on fluctuating. The applicants of the home loan also need extra documentation to get loans approved. The entrepreneurs are among the significant market available for lending financial institutions. They need funds to buy a commercial property, loans for residential property, and sometimes personal loans to expand the business. Thus the opportunity to explore for loan extension is vast for the banks. A self-employed person needs to submit the necessary documents related to business registration like shop act license, Udyog aadhar registration, Profit & loss statement duly approved by the Charted accountant, company pan & personal identity-based documents, income tax returns records. Etc. The business should be in stable condition, profitable, and also should be successfully running for at least two years. The banks are always more cautious about extending the loans to the entrepreneurs as the chances of getting defaulted are high amongst the entrepreneurs.
The loan applicant should have a clear CIBIL record in case of availing the loans from the lender. The credit score, if it is good or excellent, then, in that case, the loans can be approved quickly, while in the case of average, sometimes it can be considered, and if it is poor or low, then the loans can be rejected. The borrower can avail 80% of the property value as a home loan if purchasing a house, while the rest needs to be paid as a down payment. The home loans can be availed from any of the lenders by the loan applicant. The which-ever lender provides the lowest interest rates and is amongst the reputed lender in the market is recommended that the borrower should opt for the loans. The loan eligibility depends upon the income of the loan applicant. Amongst the entrepreneur’s higher business turnover, and profitability can avail higher loans from the lender. The lower the turnover & profitability lower is the loan eligibility of the lender. Self-employed professionals like doctors, architects, lawyers are also the ones who have to submit accurate proof of income to the banks to get the home loan approved.
Categories of self-employed people:
Professionals amongst the self-employed:
The self-employed professionals are like doctors, lawyers, charted accountants, or architects who run their proprietorship firm, or else an organization is considered self-employed professionals who run the business on the basis of their qualification. These professionals are sometimes provided home loans with lower interest rates as these people are considered amongst the modest class people of the society. Thus banks are keen to give loans to such people. The qualified professionals are the ones who do not default on the loans and can be considered as honest people of the society.
These are the category of entrepreneurs who do not require any professional qualification like the traders, merchants, salon owners, restaurant owners, estate agents. etc. These people carry their professions irrespective of their stuff and are regarded as non-professionals who work in an unorganized sector. The businesspersons have to disclose their actual income on the records and the profit & loss statement to approve the loans. The loans can be granted to these people up to the age of 65 years as these professions do not have any retirement age. The maximum tenure which can be allowed is 30 years for the repayment of loans.
Things an entrepreneur has to do to avoid rejection of loans:
Pay income tax to avail loans:
As Per the RBI mandate, the home loan borrowers must file income tax returns to avail loans from the lenders for the past three financial years. If the applicant is not amongst the honest tax payer’s banks cannot process the loans of the borrowers. Hence it is recommended that the loan applicant should do proper disclosure of income and should pay the income tax.
Keep available all the necessary documents ready:
The borrower should have all the business-related proofs and also personal identity proof to prove that the business is in the running stage and is also profitable. The loan applicants should have a consistent income and have a thriving business that the loan applicant should prove through profit & loss statement, ITR returns, and bank statement.
Maintain a good CIBIL score:
If the borrower has a poor CIBIL score, it shows that the loan applicant is a willful defaulter in credit cards, car loans, property loans, or SME loans. If the CIBIL score is poor, none of the borrowers extends a loan to the loan applicant. Hence maintaining a good CIBIL score is very important. Banks are extra cautious about the extension of the loans as the non-performing assets of the banks are increasing very rapidly. Thus only honest credit payers are given preference.
Thus the entrepreneurs are expected to keep clear transparency while obtaining the loans from the lenders by maintaining proper documentation and proper business records of income and turnover. Banks do not extend the loans to those who do not preserve or disclose the accurate income records or defaulters of taxes.