Can I Get a Personal Loan With Variable Income? – A Complete Guide
Can I Get a Personal Loan With Variable Income? – A Complete Guide
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Yes, one can get a personal loan with variable income. In today's economy, not earning a fixed income is very common; many earnings are based on a competitive basis. The common sources of variable income in today's times are freelancers, salespeople, gig workers, businesspeople, etc. Various banks in India support such professions and offer facilities like personal loans to them. However, for such people, the process of eligibility becomes a little different and more intense. This is because a personal loan is an unsecured loan, and the borrowers do not need to put anything as collateral. This is why lenders practice an intense assessment of the income profile of the borrowers.
Key takeaways:
People with variable income are considered freelancers, gig workers, corporate salesforce, etc.
Several lenders do an intense assessment of people with variable income before offering a personal loan.
A personal loan is an unsecured loan where people do not need to put any valuable asset as collateral against the loan.
Why are banks in India sceptical about providing personal loans to people with variable income?
Banks or NBFCs are sceptical about providing personal loans to people with variable income due to several reasons, such as the unsecured nature of the loan, unstable income, competitive jobs, etc.
Here are the reasons for lenders being cautious about variable-income holders:
Unstable employment: Frequent job changes or an uncertain work situation can make lenders question how dependable the borrower’s future income will be.
Irregular income: When earnings fluctuate from one month to another, it can be harder for banks to judge whether the borrower can consistently afford the loan EMIs.
Limited income proof: Not having regular salary slips or other formal documents to show earnings can make the borrower’s financial position harder to verify.
Higher repayment risk: If the borrower’s cash flow drops unexpectedly, there may be a greater chance of delayed EMI payments or loan default.
Hence, these are the 4 major reasons why variable income holders need to push themselves hard to assure the lender to provide the personal loan.
What are the eligibility criteria for a variable-income holder to get the personal loan?
Every bank in India provides different eligibility criteria for people with variable income. People with variable income come under the self-employed category for banks, which have different eligibility criteria than salaried persons.
Here are the different eligibility criteria for people with variable income (self-employed):
Name of Banks
Eligibility criteria for self-employed
Bank of Baroda
Insurance agents have been doing business for at least the last 2 years.
IDFC First Bank
Minimum age: 21 years
Maximum age: 60 (at the time of loan maturity) or retirement, whichever comes first
Employment: Both salaried and self-employed individuals can apply.
Credit score: Applicant needs to have a CIBIL score of 710 and above.
Self-employed professionals (doctors, engineers, architects, interior designers, tech and management consultants, practising company secretaries, etc.) with a minimum of 1 year of stable business.
Self-employed business persons with a minimum of 1 year of stable business.
Staff members and NRI/PIO are not eligible.
Induslnd Bank
Self-employed Professionals
The minimum age to apply for a personal loan should be 25 years
Maximum age at loan maturity should be 65 years
Minimum annual net income post-tax should be ₹480,000
Should have 4 years of post-qualification experience
Self-employed Individuals
The minimum age to apply for a personal loan should be 25 years
Maximum age at loan maturity should be 65 years
Minimum annual net income post-tax should be ₹480,000
Should have 5 years of post-qualification experience
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Bank of Maharashtra
Self-employed professionals (only doctors (MBBS, MD, MS), CAs, and architects having their own business) can also be given a personal loan in case they have been banking with the bank (with a credit facility) for the last one year.
Hence, these are the different eligibility criteria provided by the various banks for people with variable income (self-employed).
What are the tips for people with variable income to get personal loan approval?
One needs to maintain a strong credit score and push themselves to get a consistent income for personal loan approval.
Here are tips for people with variable income to get personal loan approval:
Keep your credit score healthy: A good credit history shows lenders that you have handled your past repayments responsibly.
Bring down your existing debt: Paying off some of your current loans or credit balances can reduce your overall financial burden and improve your chances of getting a new loan.
Show a steady income: Maintaining a regular and predictable source of income can give lenders more confidence in your ability to repay the loan on time.
File your ITRs on time: Regularly filing your Income Tax Returns provides a consistent record of your earnings and can help support your loan application.
Keep your bank statements healthy: Avoiding frequent overdrafts, bounced payments, and unexplained transactions can make your bank statements look more financially stable to lenders.
Hence, these are the important points one needs to keep in mind to get the easy personal loan approval with variable income.
Bottom line:
People with variable income can also get a personal loan from several banks, but with different eligibility criteria from regular salaried people. Variable income sources can be from freelancing, gig jobs, business, and private professions, like doctors, CAs, etc. Lenders often become sceptical of providing loans due to reasons like unstable income flow, the insecure nature of the loan, etc. One needs to be very careful and smart before applying for a personal loan. Hence, it is important to maintain consistent income, lower the debts, and maintain a good credit profile, especially for the people with variable income to get the personal loan.
FAQs:
Are people with variable income considered under the self-employed category?
Yes, people with variable income are considered under the self-employed category by several banks.
Why is it harder for people with variable income to get a personal loan than salaried people?
It is because self-employed people do not have a guarantee of stable and consistent income, and personal loans are a form of unsecured loan. This is why lenders become more cautious for the people with variable income.
Which people are considered to have variable income?
People with variable income are freelancers, gig workers, salespeople, businesspeople, etc.
Does every bank have the same loan eligibility criteria for people with variable income?
No, every bank provides different eligibility criteria for people with variable income under the name of self-employed.
Why do self-employed people have no regular or consistent income?
The main reason behind this is that their income is totally based on the market cycle, business demand, customers' behaviour, etc. Not fixed like salaried people to get the same income every month.
What do people with variable income need to do to get personal loan approval?
People with variable income need to maintain consistent income, lower credit dues, and a healthy credit profile to get the easy approval from the lender for a personal loan.
Can a bank reject the personal loan application of people with variable income?
Yes, a bank can reject the personal loan application of people with variable income, but not in all cases.
What can be the reasons for lenders to reject the personal loan application of self-employed people?
Sometimes banks reject the personal loan application of self-employed people because they have high credit risk. A personal loan is unsecured, and they do not have to put in any collateral, which means the income sources become more important.
Should we consider salaried people to benefit more from banks in terms of getting personal loans than people with variable income?
Yes, from a banking perspective, salaried people are more likely to benefit in terms of getting personal loans than people with variable income.
Is it difficult for people with variable income to repay the personal loan?
Yes, generally, people with variable income face more difficulty repaying the personal loan because of inconsistent income compared to salaried people.
