Can I Avail A Loan For My Work From Home Setup?

The obvious answer to this question would be, “Why not?” You can avail banks loans for your work-from-home setup.

 What do banks look for while determining the eligibility norms?

The eligibility norms for a Personal Loan are:

  • Have a regular source of continuous income
  • Possess an excellent credit score

Of course, it is easy to Avail a Personal Loan when you have salaried income. It is because banks can see where your income comes from every month. You can produce salary slips to establish continuity of your income. A secure job is an advantage. There is no doubt about that.

Banks have Personal Loan products for salaried employees and self-employed individuals. The self-employed individuals comprise professionals and non-professionals. The professionals include Chartered Accountants, lawyers, doctors, and so on. The non-professionals include business entrepreneurs, freelancers, and so on. Banks have different eligibility norms for self-employed non-professionals. It is challenging for the banks to verify the genuineness and continuity of income of the self-employed non-professionals. These persons might be earning more than the salaried employees, but their income is of a fluctuating nature. This fluctuating nature of their income works against them as it becomes tough for the banks to determine the continuity.

Home Setup

The documents required

Self-employed non-professionals, especially the freelance work-from-home category of borrowers, should submit the following documents in support of their income:

  • Income tax returns for the last two years
  • Financial statements like Balance Sheet and Profit &Loss statements if they maintain regular books of accounts. Usually, they do not because they do not come under the purview of the mandatory
  • Produce a statement of bank account where they receive the income for the past one year if they accept the income directly through banking channels. If they earn their income through cash, it becomes difficult to prove its genuineness.
  • Photocopies of bills and invoices raised by the work-from-home freelancers on their clients
  • GST registration if applicable

These documents can provide evidence of the continuous source of income. However, no one can deny the uncertainty of the revenue. It is not like the salary income that you get every month irrespective of any eventuality. The work-from-home freelancers do not have a guaranteed source of income. Of course, they earn a lot of money, but the uncertainty over the income persists. Therefore, many banks are reluctant to finance work-from-home applicants.

The times have changed

The internet has changed the way the world looks at these work-from-home categories of people. Today, you have thousands of young graduates pursuing the work-from-home freelance jobs. The presence of the computers and the internet makes it possible for people to work from home and earn a decent living. Many multinational companies outsource their jobs to these work-from-home freelancers. Therefore, there is no shortage of any work available.

Home Setup

What should the work-from-home freelancers do?

Banks rely on documents alone to prove any fact. It could be your identity, address, or even your income. They do not accept anything other than documentary evidence. Therefore, the work-from-home professionals and non-professionals should maintain documentary proof of every transaction they make.

  • Generate invoices for every work you do to demand payment from your clients.
  • If eligible to pay GST, do so regularly. Submit the GST returns on time.
  • Insist on every payment to be routed through the bank account alone.
  • Maintain two bank accounts, one for business purposes and the other for personal expenses.
  • Reconcile your invoices with the bank credits to match them.
  • Prepare the appropriate Income Tax Return form, and file returns regularly.
  • If your client deducts income tax from the invoice amount, insist on the submission of Form 16 every quarter. Obtain the Form 26AS from the Income Tax website and maintain it on record as evidence of tax deduction at source.
  • Pay your income tax in advance if you have income higher than the threshold level.

In short, maintain a documentary trail of every rupee that comes into your business account. You will need this information to explain to the banks when you apply for loans. It is a challenging task to convince the bank officials about the nature of your job and the income it generates. The work-from-home concept is a new one in India. It will take time to establish. It is more rewarding than the regular salary paying 9-to-5 jobs that people in India prefer. About five years ago, it was difficult for such self-employed people to get loans from banks. Now, it is not so because banks have started realizing the potential of this category of borrowers. Hence, the answer to the question asked is, “yes, you can avail a loan from your work-to-home setup, provided you maintain proper documentary evidence of your business transactions.”

Also Read: How to Apply Online for an Instant Personal Loan?

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