Sadly, that it's a banks common and misconception housing finance companies (HFCs) are reluctant to furbish loans - housing, personal, car or just about any loan - to professionals; the reason being the absence of a fixed income. While the salaried loan applicant may find obtaining a loan a cakewalk, courtesy his 'fixed income' status, the self-employed loan applicant, sans the proof of 'fixed income', may not be able to walk out of a financial institution with that much neededhome loan.
Often, it's the process of getting all the required documents in order that bogs one down! Let's face it: While the employed loan applicant can easily furbish proof of his income from an employer, a professional cannot. So, unlike the salaried loan applicant, the self-employed loan applicant will naturally not be able to submit certain documents such as the latest salary slip or salary certificate revealing pertinent deductions.
The self-employed applicant is asked to provide certain other relevant information regarding the nature of business, year of establishment, capacity in which the applicant is engaged, the clients, the suppliers, etc. The self-employed loan applicant needs to submit a few documents to determine his repayment and saving capacity at the time of applying for the loan such as the profit and loss statement and the balance sheet for the past three years duly certified by a chartered accountant, Income Tax returns for the past three years, etc.
And, if you're a businessman, the registration certificate under Shop and Establishment Act and Factories Act is a must-have. You also need to provide the registration certificate for deduction of professional tax and the certificate of practice, if applicable.
If it is a partnership firm, a copy of the partnership has to be produced or then, in the case of a company, a copy of the Memorandum of Association and Articles of Association will have to be produced. And then, there are also certain other documents that need to be submitted at the time of applying for the loan such as the net worth statement of the applicant or co-applicant, copies of LIC policy, if any, etc. The loan applicant may also need to provide particulars of family members such as name, age, relation, occupation, income and the likes. Besides, the particulars regarding the guarantors like the proof of income also have to be submitted.
The loan eligibility of the self-employed loan applicant is determined by considering almost the same factors as in the case of his employed counter-part - repayment capacity, savings capacity, sometimes, additional security like life insurance policies, shares or savings certificates. Also, factors such as the income of the spouse or other earning members in the family that could support the income of the professional are important.
The other relevant documents to be submitted for the loan are much the same as in the case of salaried loan applicants. The procedure for availing of the loan is also the same for the salaried as well as the self-employed loan applicants. So, if you are a self-employed loan applicant, you don't really need to go through the rigmarole of applying for loans and then, facing rejection. The key lies in keeping all your documents in order to ensure loan comes through, finally