Do Personal Loan Companies Require Proof of Income?
We do not like to admit it, but we all fall on hard times. We have all seen times when we lose or decrease our income. There are even times when we face unexpected expenses for emergencies. We all wonder at some point where to get a loan. We also wonder how to find the best loan for my needs. Facing that situation is difficult and stressful, but finding the right loan does not have to be. You just have to know some key information and use tools to loan shop online. Continue reading to find out more information about personal loan proof of income.
What Is A Personal Loan?
Let us talk about personal loan basics, first. If you are considering a personal loan or even unsecured personal loans online, you should know some information. A personal loan is when a lending agency gives you money that you must back. You are required to pay back the loan with regular monthly payments over a set period of time.
That period of time is usually three to five years. That time period could be different based on the lender. Personal loans are considered unsecured loans, which means you do not have to provide collateral to get the loan. You often must provide personal loan proof of income.
Do I Need Proof of Income?
A lender always wants to see personal loan proof of income before approving you for a loan. For a regularly employed person, it is not difficult to provide proof of income to a potential lender. However, there are non traditional employees working. They may be self employed and do not give themselves a pay check. The total income of the business may be payable to the self employed person.
There are other individuals that have S Corporations, also known as S Corps. These individuals separate the earnings of the business from their personal earnings. This protects these individuals from a liability associated with the business. However, it also requires that this individual takes a paycheck. If he or she does not take a paycheck, that person really has no proof of income.
What Qualifies as Proof of Income?
For those who are not a typical employee and do not have a regular paycheck to provide to a lender as personal loan proof of income, have no fear. There are other means of proof of income that lenders accept. A W2 is an important tax document that tells a lender how much money you have made in the previous year and from which employers. A lender may also accept your tax returns if you are self employed. This clearly lists the income you earned for the prior year. However, keep in mind, a tax return only lists the income that you claim.
If you do not claim it, it does not show up on your tax return. Be careful and make sure you have claimed all of your income if you present your tax returns. You may also be able to provide a payroll schedule or payroll documents as proof of your earnings. This is especially helpful for those who do not get paid on a regular basis.
If you are a contractor or work as freelance employee, this may also be a great way for you to prove your income. A signed letter from employer is another personal loan proof of income that a lender may accept. This is a letter signed by your stating that you work for that company. This also acts as proof of income and that you are able to repay the loan.
You may also use bank statements that includes statements of direct deposit which shows that your employer has made deposits into your account. It shows how much is being deposited and how often. If you are of retirement age, a lender may ask for other personal loan proof of income.
You may need to provide statements of how much money you are receiving in Social Security benefits, if that applies to your situation. If you are old enough to supplement your income with investment income, a lender may request that you provide proof of that income. The same is true if you receive income from any type of retirement savings account. Be prepared to show proof of any type of income that you receive.
Can I Get a Personal Loan Without Proof of Income?
I am going to be honest with you here, it is difficult to get a personal loan without any proof of income. There are, however, other loans that you may be able to obtain. There is loan that does not require you to have a job. A title loan is when you use the title of a car, vehicle, or motorcycle as collateral for a loan.
The way it works is quite simple. You give the lender the title and the lender lets you borrow a set amount of money. You cannot borrow more than the value of the vehicle that you are using as collateral. Typically, the lender does an appraisal of the vehicle you are using as collateral to determine how much it is worth. In general, you have about 30 days to repay the loan. If you do not pay back the loan, the lender takes the title and keeps your vehicle.
How Much Money Can I Borrow?
Personal loan amounts can range from $1,000 to $100,000. Your income is a huge factor in how much you can borrow.
Lenders want personal loan proof of income to help them make a decision. You need to earn at least $15,000 a year to get a loan at the lowest amounts. If you want a higher amount such as $100,000, then you need to make 10 times $15,000, so roughly about $150,000. This type of income helps the lender feel confident that you have funds to pay the loan. Either way, the lender wants personal loan proof of income to provide proof of your annual income.
What Are My Chances of Getting Approved for A Personal Loan?
At the end of the day, the lender decides if you get a loan. There are certain things you can do to improve your ability to get a loan. You can help yourself by doing these things before applying for a personal loan. First, you should get a copy of your credit report and review it. There may be errors on it that you should fix before applying for any personal loan.
Determine your credit score, so you know where you sit on the credit scale. You cannot work to correct your credit problems unless you know your credit score. You should begin to pay down as much of your debt as possible. In addition, focus on your current debt by paying all of your bills on time. You must pay the appropriate amount on time every month to improve your credit score. Most importantly, do not file for bankruptcy as that stays on your credit record for seven to ten years.
Other things that impact your credit in a negative way are constantly changing jobs. Staying in a job shows that you have stability and make lenders willing to lend you money. It shows that you are responsible and more likely to not default on the loan.
Are There Different Types of Personal Loans?
Yes, there are several different types of personal loans. What really defines them as a personal loan is that they are unsecured. There are medical loans available to those who need money specifically to pay medical bills. There are vacation loans for those interested in paying for a vacation in one amount without having to save the money. Some are even taking out wedding loans when they need money for their wedding. You can get a debt consolidation loan that is a personal loan.
You can even get personal loans online. When you loan shop online be sure that the lender is a reputable one. Be aware that most online loans have a higher interest rate. No matter which one you choose you must provide personal loan proof of income.
Why Should I Care About the Interest Rate?
Interest rates are incredibly important. The most basic definition of an interest rate is the amount a lender charges you to borrow money. The base amount you borrow is the principle. For example, you want to borrow $10,000. That is the principle amount you are borrowing. The lender assesses your credit worthiness (more later in this article) to determine how much interest to charge. Interest is referred to as the interest rate. An interest rate can as low as 5% or as high as 29%.
Your credit dictates the interest amount. If the lender charges you 10% interest, that adds $1,000 to the amount you borrow. Now, you pay back $11,000. This does not include any fees the lender may charge. The lender uses this amount to determine how much you repay per month. A higher interest amount can significantly increase the amount you pay per month. Always be sure to read the fine print.
How Can I Qualify for A Personal Loan?
Now you think you want to apply for a personal loan, but you wonder if you can even qualify for one. There are some things of which you should be aware to help qualify before filling out personal loan paperwork. You must submit some type of personal loan proof of income. Lenders look at your credit rating to determine if they want to lend you money. They look at your debt to income ratio.
The best way to understand this concept is to understand the amount of money you bring in each month in income. Then you must understand how much money you owe in debts and expenses each month. When you have a good concept of these numbers then you can see the difference between the two.
Can I Get A Personal Loan with Bad Credit?
A lender uses your credit score to determine how safe it is to loan you money. Your credit score is an important three digit number that determines many things for you. It indicates to lenders how likely you are to pay back the loan and tells lenders what your credit history has been. It gives them a picture of whether or not you pay your bills and if you pay them timely.
A credit score can be any number from 300 to 850. The higher the number, the better your score. If your credit score is 800 – 850, it is excellent and if it is 749 – 700, it is really good. If it is 670 – 739, it is good and if it is 580 – 669, it is just ok. Anything below 579 is bad, or poor credit.
What Should I Do If I Have Bad Credit?
It is really hard to maintain exceptional credit. It is much easier than you realize for your credit score to drop. For example, it only takes some late or missed payments for the numbers to decrease. Unfortunately, it is much harder to increase your credit score than it is for it to decrease. It is not impossible, but it takes hard and consistent work. There are some things you can do to help yourself immediately. First, check your credit record and make sure that all the information listed is accurate.
If there is any wrong information, you must fix it immediately. You should begin to pay off as much of your debt as you can. You could also consider having a co-signer on your loan. Since personal loans are unsecured, there are no guarantees to the lender that you pay the loan. If you have a co-signer, that person promises to the bank that you will pay the loan. If you do not pay the loan, your co-signer is then responsible for paying it. There are some lenders that are willing to give you a personal loan proof of income submitted.
How Do I Know If A Personal Loan is Right for Me?
You are the only one who can decide this for you. No one else can make this decision for you. There are some things to consider before you decide if you want to apply for a personal loan. The most important thing to determine is can you repay the loan? Do you have enough extra money every month to pay the loan amount? If the answer is no, stop here.
A personal loan is not right for you. Obtaining a loan that you cannot pay back only puts you in a worse financial position. You must remember that while you get one lump sum from the lender, you still must pay it back. If you are not sure if you have enough money to pay back the loan, you can use a loan calculator.
A loan calculator helps you determine how much you can pay. You enter how much money you earn in income per month. Then you enter in all your debts and expenses. The calculator determines how much money you have at the end of each month to pay back a loan. If you do not have enough money to cover the loan, stop again. Do not proceed with the loan. Missing payments or making late payments decreases your credit score and puts you in a worse place.
Can I Get a Personal Loan Online?
In short, yes, you can get a personal loan online. There are some things of which you should be aware when considering a loan online. There are some online lenders that are not reputable and are looking for people to scam. They probably figure that people who are in a desperate situation are the easiest to scam. Be careful of online lenders. Make sure that you do your homework when searching for an online lender. Make sure you know everything you can about them. An upside to online lenders is a quick turnaround time.
You usually get a decision in 24 hours and then the money is in your bank account in less than 24 hours. They still require personal loan proof of income. However, online lenders save you from having to go into a bank and wait for someone to be available. The application process tends to take less time because they are shorter to fill out. Be aware that there is a down side to online lenders. Typically, the interest rate with an online lender is typically higher than many other lenders. Usually online lenders cater to individuals that have less than perfect credit.
What Fees Are Associated with Personal Loans?
There are always fees associated with personal loans. Before you sign the contract for a loan, be sure to read the fine print and understand what you are getting yourself into. Keep in mind no matter what type of loan you obtain, you must provide personal loan proof of income. Some of the fees you can expect when it comes to a loan are application fees.
This fee covers the cost of fees for running your credit. These fees typically are nominal but if you have more than one application, the fees add up quickly. If you are not approved for the loan, you do not get that money back. If you can, find a lender that does not charge an application fee.
Administrative fees cover the cost of processing the application for your loan. There are lenders that do not charge administrative fees, so you should find one. Another fee that you should be aware of is an origination fee. This fee combines application and administration fees together in one sum. It usually adds in a fee that is subtracted from the payout amount.
This way, you do not have to pay a separate fee out of your pocket. Some lenders have a prepayment penalty. This means that if you pay off your loan early, you have to pay a fee. Many lenders do not have this fee, so be sure to research any fees that your lender has with your loan. No matter what type of fees the lender has, you still must provide personal loan proof of income.
When you find yourself in a position when you need a loan because you are facing some type of financial hardship, you must consider some things. First, you must always have your paperwork in order and be ready to present personal loan proof of income. Then you must consider if a personal loan is really right for you. If you are not able to pay back the loan, you should not obtain a loan. You put yourself in a worse financial position if you do not pay back your loan. Missing or making late payments decreases your credit score.
There are some things you should do if your credit is bad. You should pay off as much of your debt as you can to increase your credit score. One way to be able to pay off your debt is to create a budget for yourself. When you create a budget, you can remove all of your unnecessary expenses.
Once you list out all of your expenses, you can see what items you paying for that you no longer need. If you have gym membership that you have not used in a year, cancel it. You have magazines or subscriptions that you no longer use, cancel them. Once you create a budget for yourself, be sure to stick to it. The best way for you to be debt free is to work hard at reducing your debt and improving your debt to income ratio.
When looking for a lender, read all of the fine print so you know exactly what you are getting with your loan. Make sure you know about the fees that the lender charges before signing a contract. Make sure you know all the documents you have to provide to the lender, including personal loan proof of income. If you opt for an online lender, make sure it is a reputable one and not someone looking to scam you during an already stressful time.
Check your credit score and get your credit report. This empowers you to know the data with which the lenders are using. When you have this information, it can help you make better decisions about your loan options. Maybe you will decide now is not the best time to obtain a loan. Maybe you will decide to pay off more of your debt. No matter what you choose, make sure it is the best option for you and will not hurt you in the long run.
About the Author – Ethan Taub
Julia Peoples is a long-time business manager focused on providing decision making assistance to the public. She works with people at key points of their lives who are making important retirement and financial decisions. She has had many articles published that educate the public on sound financial decision making.
Julia writes for those who are working towards financial freedom or a better understanding of how finances work. She has shared her financial insights with individuals on a one on one basis for years.