Home loans can be taken by any individual engaged in any legal work wherein the individual earns a sufficient amount of money for the livelihood and becomes eligible for the repayment of the home loans. The person can either be an employee or else self-employed who can take the loans. The self-employed include qualified professionals like doctors, architects, chartered accountants working as auditors, or tuition teachers or owners of a coaching institute. And the un-professional ones include shopkeepers, restaurant owners, contractors, or estate agents. Self-employed persons are most likely to hide their incomes, due to which the loans may get rejected. The loan applicant must disclose their proper income in case of becoming eligible for the home loans. The purchase of a home and availing of home loans for the same is a major decision for an individual. Thus the banks are cautious while extending the loans to the borrowers as the loans extended by the bank or an NBFC should not turn into bad debt. The rising NPA, i.e., non-performing assets, is a big problem for the bank; also, during the Covid times, banks have faced a major challenge to recover the loans.
Self-employed people can get the loans until a higher age as there is no specific retirement age for self-employed people. The maximum tenure can be 30 years for the self-employed, while the maximum tenure can be up to 70 years for the self-employed. The loan applicant should be clear and transparent in disclosing documents and income, which is a mandatory criterion. Also, the loan applicant should be able to furnish all the necessary documents, which are mandatory. Also, as per the RBI mandate, it is necessary that the borrower should file for the income tax returns. The people who hide their income and do not pay taxes are not eligible for availing of home loans. Thus filing of the income tax returns is necessary. Banks are more cautious about extending the loans to the entrepreneurs as the chances of default are high. Thus having a stable and consistent income is necessary for an individual while availing of loans. Also, the business should be highly profitable, and the loan applicant should be able to present the same on paper before getting the home loan approved.
Following are the things to keep in mind by the self-employed professionals before getting home loans approved:
Proper documentation:
The self-employed home loan applicant should check on the internet or get the information from the bank branch and accordingly make the documents ready for submission before getting the home loans approved. If the borrower is unable to submit the required documents, then, in that case, the bank may not be able to approve the loans of the home loan applicant.
Proper income and business proof:
The borrower should be able to present proper income proof to become eligible for the loans. The borrower should also have proof of business registration and should be found to do the business in an ethical way. Also, the profit & loss statement signed by the chartered accountant the borrower should present.
Should have sufficient savings in a bank account before proceeding:
A person who has a sufficient amount of savings is known as a financially stable person. The individual should have a sufficient amount of savings. If the loan applicant suffers a loss in business, the borrower should still be able to remain financially stable and be able to repay the loan’s installments perfectly. If the loan applicant is found not maintaining sufficient bank balance in savings, the bank may reject the loans of such borrowers.
The documents required by the self-employed professionals are different from those of the employed person. Thus following are the documents list mentioned below to the borrowers while availing loans:
- The government recognized identity proof such as pan card, Aadhar card, voter id card, driving license, or passport.
- Income proof for which bank statement would be required.
- Profit and loss statement of the business certified by a chartered accountant.
- ITR returns statement.
- Business registration proof-like business pan, shop act license. Etc.
- Passport size photographs.
- Application form duly filled and signed by the home loan applicant.
The above information should be known by the borrower before applying for the home loans. The loans can be approved for a higher age span due to no retirement age for the borrower. Also, the loans can be taken for a longer span, even at a higher age, to reduce the burden of EMI’s.