Skip to main content

How to get Loans - For the self-employed class



The salaried class is dream category for banks when it comes to making lending decisions. After all, those in the category have a stable source of income and they seem to be the best placed to deal with equated monthly instalments. High-flyers with fat salary cheques even get loans 'pre-approved' — lending institutions are only more than happy to do so. For them, the loan application and sanction process is reasonably hassle free.


For the self-employed class of borrowers, however, things are a little different. But, do note that not everybody in this category might face difficulties. In fact, some may find the going easier than their salaried counterparts. For instance, most salaried borrowers look at a loan to finance 80% of their house purchase cost. In contrast, a self-employed businessman or professional could typically ask for the LTV (loan-to value) ratio of just 55% to 60%, in which case the bank's comfort would obviously be higher. Similarly, self employed professional like chartered accountants or doctors, too, could be looked upon favourably by banks.

All that the bank wants to ensure is that you have the ability to fulfil your monthly repayment commitments.

DOCUMENTATION

Ensure that your income proofs are in order. You could be drawing your income from several sources – dividend from business, interest on capital, etc – and the one document that could document all these would be the income statement submitted to the Income Tax department. Banks ask for this document along with three-years' I-T returns.


In addition, you also need to submit balance sheet and profit & loss statements certified by a chartered accountant. In case of professionals, their earnings would be reflected in their financial statements.

NEXT STEP

Then, banks could insist on a personal discussion with the owner/professional to understand their business models, margins, net worth, business mix, etc. You could use this platform to convince the banks about the robustness of your business. While assessing the repayment capacity of the loan-seekers, banks take into consideration the actual cash profits made by the business. Therefore, the clarity of thoughts you display during the personal discussion to convince the bank about your credentials and the business' prospects could go a long way in getting the loan approved. Furthermore, the line of business chosen by you, too, could be an influencing factor.

OTHER FACTORS

In addition, any properties you own, your track record with the banks and business-related repayment record will also be taken into account. If your repayment history is impeccable, it will brighten your chances of securing the loan. Also, if you are highly qualified and, hence, easily employable, you could find it easier to get the loan, as it indicates that in the event of the business running in losses, you can maintain continuity in earnings and, hence, repayment.

 

Popular posts from this blog

Tata Mutual Fund

Being a part of the Tata group, the fund has the backing of a very trusted brand name with strong retail connect. While the current CEO has done an excellent job in leveraging the Tata brand name to AMC's advantage, it is ironic that this was just not capitalised on at the start. Incorporated in 1995, Tata Mutual Fund remained an 'also-ran' fund house for around eight years. Till March 2003, it had a little over Rs 1,000 crore in assets and 19 AMCs were ahead of it. But soon after that the equation changed. It was the fastest growing fund house in 2004 and 2005. During these two years, it aggressively launched six equity funds, two debt funds and one MIP. The fund house as of now stands at No. 8 in terms of asset size. This fund house has a lot to offer by way of choice. And, it also has a number of well performing schemes. Tata Pure Equity, Tata Equity PE and Tata Infrastructure are all good funds. It also has quite a few good debt funds. The funds of Tata AMC are known to...

UTI Mutual Fund

Even though only a few of UTI’s funds are great performers, this public sector fund house has many advantages that its rivals do not. It has a huge base of retail equity investors and a vast distribution network. As a business, it looks stronger than ever, especially in the aftermath of credit crunch. UTI is, by a large margin, the most profitable fund company in the country. This is not surprising, since managing equity funds is more profitable than debt. Its conservative approach and stable parentage is likely to make it look more attractive to investors in times to come. UTI’s big problem is the dragging performance that many of its equity funds suffer from. In recent times, the management has made a concerted effort to improve performance. However, these moves have coincided with a disastrous phase in the stock markets and that has made it impossible to judge whether the overhaul will eventually be a success. UTI’s top performers are a few index funds, some hybrid funds and its inf...

Salary planning Article

1. The salary (basic + DA) should be low. The rest should come by way of such allowances on which the employer pays FBT and you don't pay any tax thereon. 2. Interest paid on housing loan is deductible u/s 24 up to Rs 1.5 lakh (Rs 150,000) on self-occupied property and without any limit on a commercial or rented house. 3. The repayment of housing loan from specified sources is also deductible irrespective of whether the house is self-occupied or given on rent within the overall ceiling of Rs 1 lakh of Sec. 80C. 4. Where the accommodation provided to the employee is taken on lease by the employer, the perk value is the actual amount of lease rental or 20 per cent of the salary, whichever is lower. Understandably, if the house belongs to a family member who is at a low or nil tax zone the family benefits. Yes, the maximum benefit accrues when the rent is over 20 per cent of the salary. 5. A chauffeur driven motor car provided by the employer has no perk value. True, the company would...

8 Investing Strategy

The stock market ‘meltdown’ witnessed since the start of 2005 (notwithstanding the recent marginal recovery) has once again brought to the forefront an inherent weakness existent in our markets. This is the fact that FIIs, indisputably and almost entirely, dominate the Indian stock market sentiments and consequently the market movements. In this article, we make an attempt to list down a few points that would aid an investor in mitigating the risks and curtailing the losses during times of volatility as large investors (read FIIs) enter and exit stocks. Read on Manage greed/fear: This is an important point, which every investor must keep in mind owing to its great influencing ability in equity investment decisions. This point simply means that in a bull run - control the greed factor, which could entice you, the investor, to compromise with your investment principles. By this we mean that while an investor could get lured into investing in penny and small-cap stocks owing to their eye-...

Debt Funds - Check The Expiry Date

This time we give you an insight into something that most debt fund investors would be unaware of, the Average Portfolio Maturity. As we all know, debt funds invest in bonds and securities. These instruments mature over a certain period of time, which is called maturity. The maturity is the length of time till the principal amount is returned to the security-holder or bond-holder. A debt fund invests in a number of such instruments and each of these instruments would be having different maturity times. Hence, the fund calculates a weighted average maturity, which would give a fair idea of the fund's maturity period. For example, if a fund owns three bonds of 2-year (Rs 30,000), 3-year (Rs 10,000) and 5-year (Rs 20,000) maturities, its weighted average maturity would be 3.17 years. What is the big deal about average maturity then, you may ask. Well, knowing a fund's average maturity is important because it tells you how sensitive a fund is to the change in interest rates. It is ...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now