Home Loan Without Documents - A Myth, Fraud or Reality

Jun 17, 2016 11:15 IST 20361 views

These eye catching advertising posters are very impressive. But simultaneously, a question pops up in one’s mind – Is this a myth or a reality? Pay slips, Income Tax Return Statements (ITR), Financial Reports – all are time consuming and the same has to be arranged within the stipulated time period for loan approval. So, one starts thinking –

Are these advertisements fake?

How home loan is possible without mandatory documents? 

Do marketers make out true promises to us?

Secret of No Document Home Loans -

First of all, one has to understand what does “No Doc Home Loans” mean?

These can be defined as the no asset; no income and no employment verification offers from the financial institutions to borrowers to get their home financed or simply get a home loan.

But, the truth is that no lender can sanction any money without doing the verification. Yes, banks and NBFCs lend the money with few documents but there are other factors and complications involved in it.

One has to pay the high rate of interest for home loan with few documents. The lenders charge high rate of interest because less documents means more risk involvement.

Another noteworthy factor is lenders take some time to approve the home loans; say at least 3 days or more is required for the sanctioning of home loans. No institution approves home loan in 5 or 10 minutes. Sanction letter can be issued in few minutes. So, in this context, it is necessary to understand the meaning of home loan sanction letter. This is not something which implies the disbursal of loan. It means the applicant is eligible to a home loan from the lender. So, in simple words, this establishes the eligibility for home loan of the borrower only. Many lenders issue the sanction letter, on the basis of the information provided by the applicant but detailed verification from their sides are done at the later stage.

So, let’s dig deep enough to understand the truth behind “No document home loans”.

No Document Home loans can be segregated into 2 major types and each one of that is unique in itself. So let’s explore these one by one.

1. No Ratio Home Loans – Here, the home loan seekers do not have to disclose their income details to the banks and NBFCs. So, lenders can’t find out the debt to income ratio. Generally self employed people apply for this type of home loan. And interestingly, this loan is available on a very limited basis.

‘No Document home loans’ can be classified on the –basis of income of the applicant also.

2. Unorganized Sector Home Loan – Here the basic difference is that this type of home loan is suitable for those who have gone bankrupt or have bad credit score history. Keeping into consideration the requirements of varied low income group people, whose incomes are even not stable; lenders issue this type of home loan. Here, one can maintain maximum privacy and showcase very less information but has to bear higher rate of interest.

In case of ‘No Document Home Loans’, total home loan amount is calculated and sanctioned on the basis of -

  • Earnings of last 2 years of borrower (may be estimated  or substantiated through any other  record)
  • Bank statements or Income tax returns (ITR)

So, whenever our eyes glanced on alluring advertisements - we must remember nothing comes for free in any case. Lots of factors and complications are involved with any offer.

One has to carefully tap the right and suitable offer for him/her and, figure out what works best in the particular situation and then take the decision accordingly.

IIFL Home Loans cares for the needful. To fill out the demand and supply gap, it brings forth its unique product, “20 year affordable home loan scheme” that would touch the lives of millions and millions of people. Apply to open the door to owning your own home.

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