A Personal Loan is one of the most convenient ways to get immediate finance. It involves minimum processing and documentation. It is the most flexible financing option of all loans because there is no need for the banks to verify the end use of funds. Personal Loans are usually of two types, secured and unsecured.
Who is eligible for a Personal Loan? Banks approve Personal Loans to individuals, salaried, non-salaried, or self-employed. Banks follow a slightly different procedure while approving a Personal Loan for self-employed persons. Salaried persons find it easy to get Personal Loans as compared to self-employed persons. We shall discuss some tips for self-employed persons to get the best Personal Loan offers.
What are the financial documents banks look at while dealing with Personal Loans?
- Payslips for the last three months
- Statement of account for the previous six months where the salary is credited
- IT Returns / Form 16 for the preceding two years
- Certificate from employer
- Statement of account for the past one year as proof of regular income
- IT Returns for the last two years
- Balance sheet and Profit and Loss statement for the previous two years
- Evidence of business like GST registration, and so on
As far as salaried persons are concerned, it is easy to verify the sources of income. Banks can see a regular pattern. It is one of the most vital aspects of determining Personal Loan eligibility.
It becomes difficult for the bank to ascertain the continuity of income in case of self-employed persons. It is the primary reason why banks are cautious while dealing with a Personal Loan for Self-Employed Persons.
The following are useful tips for self-employed persons:
- Maintain a proper record of income. As far as possible, route all income proceeds through your bank account. Proving the genuineness of cash receipts is difficult.
- Raise invoice on each client for each transaction. Co-relate the invoice with the receipts. Maintain the record of invoices. It can prove the source of the income.
- Pay your taxes such as GST correctly. Maintain proper record of the GST transactions. It is easy to do so because you have to pay GST and submit returns online.
- Make payments to your suppliers through your bank account. Tracing such transactions is easy.
- Prepare your balance sheets and Profit and Loss statements accurately. Engage an auditor to verify these statements. A certificate from your chartered accountant is the best way to prove the genuineness of the financial statements.
- Pay your income tax on time. File your returns correctly using the appropriate return forms.
- Maintain a list of your prominent clients and suppliers.
- Never mix your personal savings with the transactions of your firm. Maintain a separate account for your savings.
- Do not use personal credit cards to make business payments. You will find it difficult to prove the genuineness of the transaction.
- At the end of every month, obtain a statement of your firm and file it separately. It enables you to determine your monthly income easily.
Following the above tips enables you to verify the genuineness of your transactions and can help banks to determine your Personal Loan eligibility.
Also Read: Were You Aware of These Personal Loan Facts?
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