Self-employed? Don't worry

Borrowing can be an easy process if financial records are well-maintained

For the self-employed, taking a home loan is never easy. Borrowers in this category have to undergo heavy grilling by lenders, unlike their salaried counterparts. However, this is changing. Banks have started focusing more on this segment as the number of entrepreneurs is growing. Things are simpler than what they were few years back. HDFC’s schemes for professionals such as doctors and chartered accountants are example of this. However, largely, lenders have processes that are more stringent for business persons and professionals compared to the salaried.

To start with, a lender requires self-employed to produce business record of at least three years. It is also mandatory to produce tax returns. The extra scrutiny is essentially to assess stability of income. The loan process is smooth if these records are well maintained.

The broad eligibility criterion for home loan includes that you should have gross annual income of Rs 1,00,000; applicant should be at least 23 years; the loan tenure should be such that it closes with the retirement age of 59 years; and 3 years of continuous business operation. Besides you will need to furnish identity and residence proof, educational qualification certificates and proof of business existence.

Here are list of document that banks require to process an application from a professional or business owner.

* A brief introduction of business/profession
* Balance sheet, profit and loss account and statement of income with Income Tax returns for the last three years certified by a chartered accountant
* A photocopy of advance tax payments
* A photocopy of registration certificate of establishment
* A photocopy of registration certificate for deduction of Profession Tax, if applicable Bank statements of current and saving accounts for the last six months A photocopy of any bank loan, if applicable
* A photocopy of the first and last pages of the Ration Card or a copy of PAN, telephone or electricity bills
* A photocopy of LIC policy, if applicable
* A photocopy of investments (fixed deposit certificates, shares, any other fixed asset)

Apart from this, the borrower needs to show that the income is steady. Sporadic income flows can make any lender uncomfortable because it can adversely impact the payment of equated monthly instalments.The loan amount will depend on bank’s internal assessment of your income. Increasingly, banks are opening their purse to this category of borrowers. But the self-employed should not stretch themselves and borrow more than you can comfortably afford to repay.With little work and attention to detail in your record keeping, you are in a comfort zone from where you can approach any lender with confidence.

The writer works with ApnaPaisa.com