How to Get Loan Against Property Without Income Proof or ITR

loan against property without income proof

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Last updated on 8th April 2024

When you want a loan from a bank or a money lender, they have a list of papers they need from you. This helps them decide if they should give you the loan. One of the main papers they ask for is the Income Tax Return (ITR) from the last 2-3 years. This paper, often referred to as earning proof, shows the bank how much money you make. If you fill your ITR every year, you're in a good position. 

But, if you're seeking a loan against property without income proof or a home loan without income proof, it can be challenging. And if you haven't done it recently, especially if you work for yourself, the bank might say no to your loan application. 

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But, Basic Home Loan has some tips to get a loan for self employed without ITR or even a business loan without ITR. But before that let’s under the basics:

What is Loan Against Property?

A Loan Against Property (LAP) is a way to borrow money using an asset you own, like your house or land. It's a method to tell the bank, "I have this property. Can I get some money and use my property as a guarantee I'll pay back?" The bank evaluates your property's worth and, if all checks out, they'll lend you money based on its value.

Suggested read: Business loan vs loan against property

Documents Required for Applying for A Loan Against Property Without Income Proof And ITR

Applying for a loan against property (LAP) without traditional income proof and Income Tax Returns (ITR) can be challenging, as lenders typically require these documents to assess your ability to repay the loan. However, there are alternative documents you might use to demonstrate your financial stability and creditworthiness. Here's what you might need to provide:

  1. Bank Statements: Recent bank statements (usually 6-12 months) can be used to show your financial activity and stability. Lenders use these to gauge your income regularity and spending habits.
  2. Property Documents: These include the title deed, proof of possession, and a recent property valuation report. These documents establish the legality and value of the property you are offering as collateral.
  3. Proof of Alternative Earnings: If you have other sources of income, such as rental income, dividends from investments, or earnings from a business that are not reflected in your ITR, you can provide documents like lease agreements, dividend slips, or financial statements of your business.
  4. Form 16 (if employed): Although you might not have ITR, if you are employed, your employer-issued Form 16 can act as proof of income. This document details your taxable income and TDS (Tax Deducted at Source).
  5. Credit History: A good credit report can help compensate for the lack of ITR. It shows your past credit behavior and loan repayment history.
    Proof of Occupation: Relevant licenses, registration certificates, or professional practice certificates can be necessary if you're self-employed or running a business.

Tips To Get a Loan Against Property Without ITR

  1. Apply for a loan with a co-applicant: When you're aiming to secure a home loan without ITR, having a family member join you in the application can be beneficial. This additional person is termed as a "co-applicant." The presence of a co-applicant can boost your chances of getting a positive response from the bank and potentially lead to more favorable loan terms.
  2. Understand your Loan to Value (LTV): Imagine you want to buy something, and you need the bank's help to pay for it. The bank uses a rule called Loan to Value (LTV) to decide how much they'll help. If the LTV is 90%, the bank will cover 90% of the cost, and you'll need to pay the remaining 10%. If you're missing some important papers, like proof of your income or tax forms, you might ask the bank for a lower LTV, like 80%. This means the bank pays 80%, but you'll have to pay the bigger part, which is 20%, from your own pocket.
  3. Try Out Peer-to-Peer (P2P) Lending: P2P lending is like borrowing money from a group of people online, not from a bank. It's done on websites where people come together to lend money. Because it's a bit riskier for those lending the money, they might ask for a higher rate of interest. If you don't have papers showing your income, you can try P2P lending to get a loan.
  4. Keep a strong CIBIL score: Your CIBIL score is like a report card for how well you handle money. If you don't have an Income Tax Return (ITR) to show, having a good CIBIL score becomes even more important. A score above 750 can help convince banks to give you a loan. So, always make sure to pay any monthly payments, like EMIs, on time to keep your score high.
  5. Connect with your bank expert: When you open a savings account, most banks assign a Relationship Manager to assist you. This expert is there to guide and answer any banking questions you might have. If you're unsure who your Relationship Manager is, simply visit your bank branch and request an introduction. When discussing loans, emphasize your commitment to timely repayments. Then, inquire about the possibility of obtaining a Loan Against Property, even if you lack certain documents like the Income Tax Return (ITR).

Key Factors in Loan Approval: Transparency, ITR, and Banking Habits

When you're trying to get a loan, a bank official will visit to inspect the property you're offering as security. If this property is connected to your business, it's vital to clearly share details about your income. If you're missing standard documents like income proof or the ITR form, it's important to be upfront about it. This clarity ensures the bank can accurately gauge your financial stability and repayment potential.  For those considering a term insurance without income proof, similar transparency is essential. This can also affect your home loan processing time to some extent.

Suggested read: Co-borrower vs. co-applicant

It's crucial to file your Income Tax Return (ITR). If you missed filing it last year, be honest with the officer about the reasons. For added assurance, it's wise to seek advice from a tax expert and ensure your current year's taxes are filed promptly.

For a Loan Against Property (LAP) application, lenders review your bank activities. A steady account balance and responsible banking can enhance your loan approval chances.

Why Income Tax Returns (ITR) Matter for Getting Loan Against Property

When you want a loan, the bank needs to know if you can pay it back. One way they check this is by looking at your Income Tax Returns (ITR). This document shows how much money you made in a year. Even if you didn't earn much and didn't owe any taxes, it's a good idea to file an ITR that says "NIL" or no income.

The bank looks at the money you report in your ITR to decide if you can handle a loan. The ITR tells them about all the money you earned from different places. Some banks also want to see your Computation of Income Statement (COI) because it gives more details about your money. That's why many banks ask for your ITR from the past two or three years before they give you a loan.

FAQs about Loan Against Property Without ITR

Yes, it's possible, but the process might be longer and may require meeting additional requirements. Some loans don't demand a lot of documentation. Choosing a smaller loan amount can also increase your chances of approval. 

In some cases, yes. However, the person must have a reliable source of income to make the loan repayments.

Typically, loans against property don't cover 100% of the property's value. Most lenders offer up to 70% of the property's market value.

Yes, you can show a loan against property as a liability in your financial statements or when required.

Some no-doc home loans or P2P lending platforms might not require traditional income proof.

Eligibility typically depends on the property's market value, the applicant's repayment capacity, and the lender's specific criteria.

The main disadvantage is the risk of losing the property if you fail to repay the loan.

It can be a good idea if you need funds and have a clear repayment plan. However, it's essential to understand the terms and risks involved.

Published on 27th September 2023