India is a land of entrepreneurs. Whole world salutes the spirit of enterprise of Indians. But when it comes to taking home loans they have to undergo heavy grilling by the lenders over their salaried counterparts. This makes you think that being in business limits your prospects of getting a home loan, but, think again. Time has gone that lenders could ignore the growing crop of entrepreneurs.
In fact as the number of entrepreneurs have increased manifold in the recent times, the banks too are taking keen interest in this segment.
Thus taking cognizance of the scenario, banks have made all out attempt to make the lending activity simpler for entrepreneurs than what it was few years ago. Still the fact cannot be ignored that process you as a business owner has to go through, will be slightly different, in case you were employed.
The banks as lenders have to follow slightly stringent norms. Your lenders would want that you should have a business record of at least three years. Then they would like to go through your tax returns filed for the previous years to have an overview of the stability of your income.
Thus if you are in the business and a home loan aspirant too then it is important that you keep good records of your business. These will come handy when you approach the lender. If you are properly documented then in all probability you will be considered to be in low risk zone.
The broad eligibility criteria for taking home loan includes that you should have gross annual income of Rs. 1, 00,000 or above, be in the range of 23 years of age and above with maximum age of 58 years or retirement age, whichever is earlier at the time of loan maturity and 3 years of continuous operation. Besides you will need to furnish identity and residence proof, educational qualification certificates and proof of business existence.
We list here the documents required to be furnished by the Self-Employed/Businessmen:
- A brief introduction of Business/Profession.
- Balance Sheet, Profit and Loss account and statement of income with Income Tax returns for the last 3 years certified by a CA.
- A photocopy of Advance Tax payments (if applicable).
- A photocopy of Registration Certificate of establishment under shops and Establishments Act/Factories Act.
- A photocopy of Registration Certificate for deduction of Profession Tax (if applicable).
- Bank statements of Current and Saving accounts for the last 6 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/Electricity Bills.
- A photocopy of LIC policy (if applicable).
- A photocopy of investments (FD Certificates, Shares, any other fixed asset).
But basic purpose outlined by lenders remain same whether you are employed or in business like home loan is offered for purchase of housing accommodation like flats, row houses, bungalows, etc. on ownership basis. Loans will be given for buying or constructing a new flat/house.
You should have steady income from your business and above all an inclination to repay. Loan amount depends on your repayment capacity as determined by the Bank. The Equated Monthly Installment (EMI) would be based on the quantum of loan, rate of Interest and the repayment period.
One thing is for certain, these loans are not uncommon today. Entrepreneurship is at an all time high and financial institutions are aware of this fact and have special programs and regulations in place to serve this group of borrowers.
But do not forget the golden ruledon’t eat more than you can chew!
Do not borrow more than you can comfortably afford to repay.
So here the advice is that you bargain for the lowest rate and be sure that you read the fine print.
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
and believe us that they will not be able to decline!