In the realm of personal finance, filing income tax returns is one of the essential duties of every citizen of the country. Not only does it help a person become a respectful, law-abiding citizen of a country, but it also helps a person obtain financial benefits such as loans and other assets.
However, there is a certain threshold of income one needs to make so that one can reach a stage where one can easily fulfill the tax obligations and be required to pay taxes as per the government norms. People below that income level don’t need to pay income tax.
The problem arises is that those individuals face trouble getting personal loans, which then creates problems for them individually as they don’t get financial assistance from traditional financial institutions during their time of need. Here, a personal loan agent can help a person find alternative options.
In this blog, we will look at alternative options that are effective in getting financial assistance from the traditional banking system.
Understanding the Importance of ITR
ITR is one of the most important aspects when it comes to personal loans. It gives proof of income and shows the regularity of the person in meeting their financial obligations. In the Indian financial market, the banks often judge the creditworthiness of a person by analyzing their credit score.
However, a person with no credit card (penetration in the country is still low) cannot verify their creditworthiness; thus, they barely have a credit score, which will allow the person to get loans, build their first credit report, and develop a credit score.
Challenges Faced by Individuals Without ITR
For individuals who don’t file ITRs or aren’t required to file them, it’s quite tough to get a loan, and thus, they tend to stay out of the traditional banking paradigm. The problem with those individuals is that they don’t have a history of credit.
A bank doesn’t want to increase the default rate; therefore, they become extra cautious of that person who is willing to take a personal loan as they don’t have a line of credit. Small business owners, freelancers, and other people who have irregular streams of income often face this trouble and need to go for an alternative route.
Here, we have mentioned some of the other lending options that are available to them, and through that, one can get financial assistance in time.
- Exploring Alternative Documentation
If a person doesn’t have the ITR documents, they need to consult with the loan officer about how other alternative documents are acceptable. For example, one can show salary slips and bank statements, which show a person’s income flow and whether the loan EMIs will be manageable for that person or not.
A business individual can show their turnover statement or rent agreement, which works as other income documents that the bank validates for a personal loan.
- Opting For Collateral-Based Loans
In the absence of ITR, one may also go for a collateral loan, which requires fewer documents as one keeps one of their possession and assets in the bank, and in return, one can get a loan. To assist in getting a loan from the proper lender and at a lower interest rate, one can consult with a DSA business agent who can help the client get a better deal.
- Exploring Non-Banking Financial Institutions (NBFCs) and Online Lenders
NBFCs and online lenders are the new players in the market, which is extending the reach and including a lot of people in the traditional financial sector. A person can go for these options, as here, a person doesn’t need to provide the ITR statement and can check the application for the loan through a technology-driven process.
Here, the lenders leverage their technology to assess the creditworthiness of a person, and the company does that by checking the online activity and financial transactions of that person.
- Considering Joint or Co-Signer Loans
The last resort for a person is to apply as a joint applicant, where two persons sign for a single loan, and as a co-signer, the income of the couple increases, and the lender can thus release the loan.
These are some of the most beneficial options that a person can avail of when they can’t produce their ITR, but they can still get a personal loan through these avenues and build a strong credit score for future requirements.
