Income verification shows that you can repay a loan but without it, how do you get a loan? Keep reading to learn how.
You need a loan because you need money. You apply for the loan and the bank says that they can’t approve you because you can’t show that you’re earning money.
It’s one of the great ironies of the lending industry – without money, it’s hard to get money. That’s because almost every lender asks for proof of income. However, there are alternatives out there.Here’s what you can do to get a personal loan with no income verification.
What Is Proof of Income?
When you take out a loan, the lender needs to know that you can pay it back and how long it would take for you to do it before giving you the loan offer. This includes all the other fees, like the origination fee, application fee, among others.
To verify that and set the loan term, they ask you to submit official documents that verify your stated income. These may include but are not limited to:
- Pay stubs
- W-2 tax forms
- Payroll verification
- Tax returns
Income verification is usually simpler for a borrower who works as an employee of a company. The lender can easily verify through the company that the applicant has a steady income and will continue to earn that same amount or more which leads to faster loan approval.
Submitting a proof of income document is a bit more involved for independent contractors and others who are self-employed borrowers. The Personal loan lenders have little to no guarantee that your level of income will continue, so they tend to ask for more documentation.
They want to see that you’ve been making the same amount or steadily more over the past few years, so you’ll probably have to submit at least two years of tax returns.
Of course, that’s assuming that you’ve been self-employed and earning for two or more years. If you’re newly self-employed or an erratic earner, you don’t have many options for proof of income.
Granted, you can get personal loans without proof of income from certain sources. It is significantly more difficult, however, and you’ll need to prove yourself in other ways.
How to Get a Personal Loan with No Income Records
The point of income verification is to show that you can repay the loan. So, how do you take out a personal loan with no income verification? If you have no proof of income – or no income at all – you’ll need to demonstrate your creditworthiness in other ways to have your loan application approved.
Putting Up Collateral
A Secured personal loans is designed for people who need cash but have difficulty proving that they can pay it back. As an alternative to proof of income documentation, the lender of a secured personal loan will ask for collateral, which is an asset that the lender can take as your loan payment and sell to recoup its losses if you default.
- Real estate
- Investment products
- High-value goods
If a loan officer approves your secured loan, he or she will offer you a percentage of what your collateral is worth. (It won’t be 100 percent.)
Getting a Cosigner
Personal loan lenders care more about recouping their investments than about you personally paying them. If you don’t have proof of income, you could ask someone with a reliable earnings history and good credit to co-sign with you.
Be aware, though – co-signing on a loan program isn’t just vouching for you. The co-signer is putting his or her name on the loan. If you default, he or she is responsible for paying back what you owe. And if that happens, or if you pay late, it hurts your co signer’s credit score, and that could get in the way of them getting a loan in the future.