The economy is changing and jobs that did not exist a year ago have become widely popular nowadays. It may so happen that upcoming jobs may not provide salary slips. If you are a freelancer, run a business, or are someone who does not receive a regular paycheck, you can still receive financial assistance. You have to provide adequate proof of your current income to convince lenders of your repayment capability. Read on to know more about the various strategies and tips to navigate the loan application process, and increase your chances of securing personal loans without salary slips.
10 ways to avail of personal loans without salary slips
- Provide alternative proof of income: If you are self-employed as a freelancer or run a business, you will not be able to provide salary slips. You need to submit payment invoices, show your income tax returns, business address proof, or rental income receipts, or disclose your bank account transactions to prove that you have a steady income to repay the personal loan. Lenders will evaluate these documents to measure your creditworthiness i.e. your repayment capability.
- Maintain an excellent credit history: Without a salary slip, your CIBIL score is your next best chance to prove that you are a trustworthy borrower. Your credit score reveals your debt status and credit-maintaining abilities. If you can show a credit score above 750 to your lenders, you will have no problem securing funds. To maintain an excellent credit score, do not leave your debts until the last deadline. Try to close them early and often. Check your credit reports for any discrepancies before you apply for personal loans.
- Secure collateral: Secured loans are also an excellent way for borrowers without salary slips to avail of higher loan amounts. You have to provide some form of collateral like assets, property, or gold, which the lenders would view as security against the loan amount that you want to borrow. If your collateral has great market value, you may also avail of lower interest rates.
- Sign up with a co-applicant: If you lack a salary slip as well as good credit scores, try applying for joint loans with a co-applicant who has a steady income as well as excellent CIBIL scores. Banks and NBFCs will be more likely to trust you with a co-applicant and loan your desired amount. In the event of you failing to repay the monthly settlements, lenders can turn to your co-applicant to repay their amount.
- Choose microfinance loans: Microfinance loans are smaller loans that are offered to individuals without proper pay slips and credit scores. If you urgently need a small personal loan, you can take a microfinance loan. However, they have significantly higher interest rates than traditional banks, so it is best to check if you can secure a joint loan with a co-applicant before turning to this option.
- Secure a guarantor: A guarantor differs from a co-applicant in the sense that if you secure funds with a joint loan, the repayment responsibility falls on both, whereas in the case of a guarantor, the primary repayment responsibility lies with you. A guarantor agrees to pay the loan in the unlikely event that you are unable to do so. A guarantor can also be a co-applicant.
- Apply for a credit card: If you need a small personal loan, you can also purchase a credit card to meet your needs. Credit cards also allow you to build up a good credit score, which may come in handy to secure loans if you need more funds. However, please note that credit card interest rates are significantly high and your credit score will topple if you frequently miss repayment deadlines.
- Maintain your FOIR: Another way to secure personal loans without a salary slip is to prove that you do not have any other major existing debts. If your fixed-obligations-to-income ratio is negligible and you spend no more than 40% of your income on debt repayment, lenders may offer you a small personal loan. The key is to prove that you have enough income to repay the loan amount.
- Approach non-banking finance companies: Non-banking finance companies (NBFCs) are non-traditional lending firms that may be more willing to offer personal loans without a salary slip. To secure a higher loan amount, you must have a steady income and excellent CIBIL scores to prove your repayment capability. NBFCs disburse loans with minimal paperwork, however, they may charge higher interest rates than banks.
- Apply for peer-to-peer loans: Peer-to-peer lending is riskier than all other forms of loans. They do not require any middlemen like banks or NBFCs. Peer-to-peer (P2P) websites connect borrowers that need funds with other individuals, who may offer the amount at higher interest rates with no collateral or asset security. It is also known as ‘crowd lending.’ Make sure to check the legitimacy of the P2P website before availing of loans.
- Apply for a loan against property: One of the best ways to secure a higher personal loan amount without a salary slip is to apply for a loan against property. Lenders will offer you a loan amount, which is 60% to 80% of the market value of your property. Since it is a secured loan, you may avail of lower interest rates. You can also enjoy tax deductions on the interest paid.
When applying for personal loans without a salary slip, try to provide alternative income proof and do not make any big-ticket purchases right before so as to not lower your credit score. Try finding a lender with simple eligibility criteria. Andromeda is one such lending firm, offering quick personal loan disbursals at low-interest rates and minimal documentation. They have tie-ups with over 270+ banks and NBFCs across the country to offer a wide range of financial products. If you are unsure of your repayment ability, do not shy away from consulting their professionals for some advice. Do your own research as well. Compare different lenders to check which one of them offers the best interest rates without a salary slip.