Welp MagazineProof of income is a major factor in most loan processes. Being able to assess proof of reliable income is one of the necessary items that many lending entities look at before they will grant someone a loan.
This is considered common practice in much of the lending world, but it can be a big drawback for those who work in unique industries who might not be able to prove their income.
If you have found yourself in a situation where your profession, or your working situation, has caused you to be unable to get a loan, you are not alone. There are many people who are denied a loan every year due to lack of proof of income.
Thankfully, there are options out there for people who do not have paystubs that they can give to lenders to prove their income. If you want to learn more about this type of loan, read on!
What is Proof of Income?
Proof of income is provided via taxes for the past two years or using pay stubs. If you own your own business, or you work as a contractor, taxes are going to be the only way that you can establish proof of your income. For those who work hourly and get a pay stub from their employer, pay stubs are easy to offer up to a lending institution to provide proof of your annual income.
How is Proof of Income Calculated?
Proof of income is looked at as a gross number. Many lenders simply take your hourly rate and multiply it by an average number of hours in a month. This becomes the monthly rate that they use to calculate your gross annual income.
Using the gross income is always favorable to borrowers because it does not look at taxes that are taken out and it excludes items that are deducted from a paycheck like retirement or child support. Lenders use this income verification to prove that you have the money to take out a loan.
How to Get a Loan Without Proof of Income
If you do not have any proof of income from your daily job, you might find it hard to get a loan when you need one. Thankfully there are some good options out there for this circumstance. These loans are referred to as no-income loans and they are based on calculations about liquid assets like cash or property that can be used a collateral for the loan.
Lenders like iCASH will look at your credit history, your bank accounts, and your assets to figure out how much money you can borrow. Even things like investments and retirement income can be used as proof of income for these kinds of loans.
SIVA loans are stated income and verified asset loans. These are the most common kind of no-income loans and they are a great fit if you have a vehicle or other valuable item that can be used as collateral for the amount of money you need to borrow.
You might also get a NIVA loan, which is a no-income, verified assets loan. This loan is the type that is most commonly offered through online lenders who are willing to give no-income loans to borrowers.
What Can I Use as Collateral for a loan?
There are many things that you can use for collateral for a no-income loan.
- A vehicle
- A house
- Government bonds
- Appraised valuables
These items all have a fairly stable market value, which can make them a great choice for a lender to use as backing for the loan that you are trying to take out.
Pros and Cons
The pros to a no-income loan are obvious. You can get the loan that you have been needing, even without proof of income. Being able to use collateral or non-traditional income sources to finally get a loan for a home improvement project or some other need can be a big relief!
These kinds of loans are fairly easy to initiate as well. You will just need to provide limited information about the valuable item that is being used as collateral, or you might need to show some form of proof of tip income, alimony, or other less traditional income, and that’s it.
The primary con for this kind of loan is higher interest rates than you would pay for a traditional loan of the same amount. The risk associated with this kind of loan is considered to be greater than with a traditional loan, so the interest rate is higher.
The other con that you might run into are higher fees and a term that is calculated in months, rather than years. No-income loans are set up to protect the lender as much as possible, which sometimes means that you will not get to work with an even number of months for repayment and you might have to pay additional fees and interest for the opportunity to get this kind of loan.
Always make sure to ask questions about term, fees, and interest rates before you agree to take out any loan. This is especially true of no-income loans. Not all lenders are created equal when it comes to offering loans to borrowers without proof of income and you need to be aware of what you are agreeing to before you sign on the dotted line.
Getting a Loan Without Proof of Income Can be a Breeze
If you pick the right lender to help you with your no-income loan, you will have a good experience and you will be able to get the money that you need without jumping through a bunch of hoops. Always make sure to use a lender that is open about the term, interest rate, and fees associated with your loan. Make sure to do some research about the lender before you reach out to them.
Consumers are always encouraged to consider other ways to pull money together if they need it, but loans are sometimes a necessary part of life. Armed with the information in this article, you will be able to find the right loan for your needs, even without proof of income.
