In India traditionally loan sanctioning required heaps of paperwork from income tax returns to salary slips. However, due to the recent advancements in the financial sector, the landscape has changed. Now getting a loan without formal income proofs is possible irrespective of whether you are a business owner, freelancer, etc.
With the advent of digital lending schemes backed by the government and alternatives to credit scoring, many people who were earlier unable to take a loan may be able to secure a loan now. Through this article we will explore the best ways to secure funding when you don’t have tadeonal documents.
1. Use your credit score
If you do not have traditional documents like payslips or income tax returns, then banks will rely on your past credit history.
- CIBIL score rule: A CIBIL score of 750 and above is considered a good score and generates trust in the eyes of the lender. Are there options available in non-banking financial companies and digital fintech lenders who may not require traditional salary slips? ITR if your credit score is good and there are compensating factors available.
- Low credit utilization: You should try and keep your credit card usage within 30-40% of the limit and make complete payments to portray your repayment capacity.
2. Use of digital bank statement as an alternative
Even if you do not have a salary slip, the lender will use your bank statement to assess your cash flows.
- Consistent periodic credits: Having consistent monthly credits even from multiple sources for shop owners, freelancers, etc. is highly beneficial as new-age AI platform-based lenders will use that to assess your income.
- Use of account aggregators: Most digital lenders now are using account aggregators as per guidelines from the Reserve Bank of India. So you need to only share your digital statement as a PDF, and you may get a prima facie sanction within a short span of time.
3. Choosing a secured loan
In case of a larger loan requirement, and that too without income proof, it is better and more reliable to go for a secured loan. Since these are backed by collateral, this will improve your chances at securing a loan.
- Gold Loans: This is the simplest way in which you can just walk in with your jewellery and walk out with a loan within hours. This is a very big market in India.
- Loan Against Property In case of a larger loan requirement, taking a LAP against your residential or commercial property is a better alternative. Many lenders like PNB Housing. IDFC First has specific low-income programs.
- Loan Against FD / Shares: This is a very quick loan where you can mortgage your FDs, shares / mutual funds, or even certain insurance policies and get a sanction quickly.
4. Use of a co-applicant for the loan
In case you lack the necessary documents you can try and add a co-applicant like a spouse if they have stable income with salary slips ? Income tax returns etc. This will help make the application stronger.
5. Government-backed schemes:
For small businesses the government is offering several schemes, especially for those who don’t have formal records or documents. India offers several schemes designed specifically for those who might not have formal financial records:
- PM Mudra Yojana: This offers Shishu Loans, which are up to INR 50,000 with minimal documentation for micro companies.
- PM SVANidhi: This scheme is specifically designed for street vendors who are in need of capital.
- PM Vishwakarma: This is a scheme for artisans and craftsmen.
Below are some of the RBI registered Fintech apps who may offer you a loan without income proofs by analysing your digital items like utility payments , other repayments etc.
| App Name | Maximum / Potential Limit | Optimal for |
|---|---|---|
| Olyv (formerly SmartCoin) | Up to ₹5 Lakh | People with low Cibil score and freelancers |
| mPokket | Up to ₹45,000 | Workers who are performing small gigs and students |
| PayRupik | Up to ₹50,000 | For emergency requirements |
| DMI Finance | Up to ₹10 Lakh | This is for small business owners |
| KreditBee | Up to ₹4 Lakh | Wuick digital KYC process |
Frequently Asked Questions (FAQ)
Q1. Can I get a loan if I do not have any documents at all?
No, you will always need identity and address documents (KYC). While there may be some waivers for income documents, having complete KYC is a mandatory requirement.
Q2. If we take a loan without income proof, will the interest rate be higher?
Yes, as these loans are perceived as more risky as compared to those where there is a formal record of documents available, lenders will charge a premium on the interest rates here.
Q3. How long does the process take?
In most cases NBFCs will need 7-15 working days from the date you submit complete documents, while online fintech apps may sanction the loan much faster, maybe in minutes in the case of unsecured loans.
Q4. If I want to take a LAP, is ITR mandatory?
No, while most banks may ask for the same, certain banks, NBFCs, and fintech apps may use alternative methods to assess your income. You may use the help of a loan advisor to guide you on the same.
Q5. I took a loan without income proof. What happens if I fail to repay the loan?
The consequences are the same as for a normal income loan; if it’s a secured loan, banks may use the SARFESI Act to possess and auction the property to recover the dues. For unsecured loans, they will also initiate the recovery process, and your CIBIL score will take a big hit, further reducing your chances of loans in the future.
Important Tip: Please do verify that the app you are using is an RBI-registered NBFC. Do not fall prey to apps on social media without checking if they are approved by the RBI, as they may charge sky-high rates.