Quick and flexible financing options are what borrowers are searching for today. Medical expenses, travel plans, home repairs, educational needs and last-minute emergencies are some reasons why people are looking for personal loans. It becomes a dependable option because it does not require collateral and can be used for multiple purposes.
One key difference between whether or not you file an income tax return is the impact that filing an income tax return can have on your ability to obtain a loan. Many people have lifelong tax records that are updated regularly. However, there are also a significant number of people who do not have these tax records. Comparing the two different approaches will help you determine which option is best for your situation.
What It Means To Apply For A Personal Loan With ITR?
An applicant who provides an income tax return during the loan process offers a strong indicator of earnings. Lenders use this document to verify income patterns over a period. It becomes proof of financial consistency and helps reduce uncertainty.
Why Lenders Prefer Returns
- It becomes easier to assess income stability.
- Past earnings are clearly visible in official filings.
- Processing becomes faster because fewer clarifications are required.
- Higher credibility is built when income is properly reported.
Who Usually Opts For This Approach
Salaried employees, self-employed professionals, consultants, and business owners who have kept their financial records in order prefer applying this way because it enhances their overall loan eligibility.
What It Means to Apply For A Personal Loan Without An ITR
Some borrowers seek a personal loan without ITR due to irregular income, new employment, informal work patterns, or simply because they have not started filing returns yet. Lenders look at alternative documents to assess income.
Typical Supporting Documents in This Case
- Bank transaction history
- Monthly salary slips
- Offer letters or job confirmation letters
- Business receipts or invoices
- Utility bills for address verification
- Savings pattern through digital transactions
Who Usually Chooses This Path
First-time earners, freelancers and individuals working in cash-centric jobs often explore this option. While possible, approval depends on how strong the alternate proofs are.
Brief Comparison Table
|
Criteria |
Personal Loan With ITR |
Personal Loan Without ITR |
|
Income Evidence |
Verified through tax filings |
Verified using bank statements or salary slips |
|
Processing Time |
Quicker because income is already documented |
Slower due to additional checks |
|
Interest Range |
Often more favourable due to reduced risk |
May vary depending on financial visibility |
|
Loan Amount |
Higher potential amount |
May be smaller and conservative |
|
Verification Process |
Simple and predictable |
More documentation required |
|
Risk Perception |
Lower because income is recorded officially |
Higher because financial clarity is limited |
|
Best For |
Stable income earners |
Individuals without formal earnings records |
Benefits of Applying With Regular Tax Filings
Borrowers who can submit ITR generally enjoy several advantages:
- Better Credibility: When lenders can see your official income declaration, it reduces risk and increases trust.
- Improved Chances of Approval: Strong income documentation can improve the approval percentage significantly.
- More Favourable Interest Rates: As there is a greater chance that a borrower will repay their loan, lenders are more willing to provide competitive interest rates to approved borrowers.
- Higher Eligible Loan Amounts: The lender will provide a loan amount that is higher if they are able to verify the income of the borrower by means of documentation.
- Reduced Time To Process: Verified documents can expedite the underwriting and verification processes.
Challenges Of Getting A Personal Loan Without An ITR
While feasible, applying without ITR comes with certain limitations.
- Risk Perception & Increased Caution: Without an ITR, lenders have to depend on alternative methods to verify your income.
- Higher Interest Rates: The uncertainty regarding your income may also lead to higher interest rates from lenders.
- Additional Documentation Required: Be prepared to provide additional documentation, such as salary slips and even employment calls, for verification purposes.
- Lower Loan Amounts: Loan amounts may be capped until there is sufficient evidence of consistent income.
- Longer Processing Time: The additional verification steps may result in longer processing times for approval compared to your regular loans.
Which Option Should You Choose?
The choice depends on your current financial profile:
Choose A Personal Loan With ITR If:
- You have a steady income and filed returns
- You want better interest rates and higher amounts
- You prefer fast approval with minimal questions
Choose A Personal Loan Without ITR If:
- You are new to employment
- You earn irregular or cash-based income
- You need a small-ticket credit urgently
- You can present strong alternative documents
Conclusion
The difference between applying with tax filings and applying without them is primarily about clarity. One route offers complete financial visibility, while the other relies more on supportive documents. Borrowers should choose based on what best represents their income pattern. A well-organised financial record always leads to better outcomes.
You may explore options offered by Poonawalla Fincorp, known for its customer-focused lending approach, for a seamless and transparent borrowing experience.
FAQs
1. Can I apply for a loan if I haven’t filed any returns?
Yes, you can still apply by submitting bank statements, salary slips or employment proof that reflect your income pattern and repayment capacity to the lender.
2. Does filing returns improve the approval ratio?
Yes. Filing returns gives lenders verified information about your income, making the evaluation simpler and more reliable. This often leads to higher approval chances and smoother, faster processing during assessment.
3. Will my bank statement be enough if I do not have tax filings?
Bank Statements are valuable, but are often insufficient. Most lenders will want to see salary slips, ID proofs and possibly other documents, in addition to the bank statements, to provide clarity regarding your income and consistency of your repayment capability.
4. Do lenders treat both types of applicants equally?
Lenders evaluate both types of applicants. However, there is a difference in the evaluation process for each type of applicant. Lenders generally process applications for those who file their taxes more quickly than for applicants whose incomes have not been confirmed through the filing of tax forms. In the latter case, lenders typically require further verification of the applicant’s ability to repay and the consistency of their repayment capability.
5. Should new earners start filing returns?
Yes, filing tax returns enables new earners to develop a credible record of income and to improve their eligibility to receive higher loan amounts, along with more precise documentation of their history of earnings.