Finance

How to Get a Personal Loan With No Proof of Income

November 27, 2019

Income verification shows that you can repay a loan but how do you get a no doc personal loan with no proof of income? Keep reading to learn how.

Do you need a loan but have been refused everywhere? You need a loan because you need money. You apply for the loan and the bank says that they can’t give bank approval because you can’t show that you’re earning money. If you find yourself in this predicament, you might want to consider a no income verification mortgage or a payday loan as viable options.

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 to get a loan and even refinance without income verification. A stated income loan, or a no-income verification loan, requires no income documentation, bank statements, or tax returns for self-employed borrowers.

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. If traditional means of income proof is not possible for you, lenders may consider unsecured loans or no credit check loan options.

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. 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. You may need to explore options such as a payday loan, emergency loan, or a no income verification mortgage.

Granted, you can get personal no income 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 Proof of 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 or bank statement? 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 loan 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.

Common sources of collateral include:

Cars (car title loan)
Real estate, which can be your personal property or an investment property
Investment products
High-value goods

If a loan officer approves your secured loan, they will offer you a loan amount that’s a percentage of what your verified asset is worth (it won’t be 100 percent). Typically, the collateral’s value must be at least double the loan amount. This is especially true for investment property collateral loans due to the potential fluctuations in property values.

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. This is a common practice for those seeking unsecured loans or no credit check loans, as these types of loans carry more risk for the lender.

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.

Before you ask someone to co-sign a loan program with you, think of what that might do to your relationship.

Having Good Credit

If you’re not submitting income proof to your lender, you’ll definitely have to show that you have a responsible borrowing history. Your credit score will be key, especially when seeking a no income verification mortgage or other type of loan.

n this case, you’ll need to perform a credit check. Ideally, your credit score will be at least 750 if not higher. Anything from 750 to 850 is usually considered to be “excellent” credit. If you can’t quite get there, aim for the higher end of 700 to 749. That’s generally thought of as “good” credit, though different personal loan lenders will have different benchmarks. This is true even for more specialized loan types such as a DSCR loan or emergency loan.

Your credit score reflects what’s on your credit report, so events that bring down your credit score are also red flags on your credit report. These include:

Late or missed loan payments
Accounts sent to collections
Bankruptcy filings
Home foreclosures
High credit card balances

If you have bad credit or too many of these negatives on your credit history report, you’ll need to improve your credit score before you look at how to get a personal loan with no proof of income document.

Start by paying off your credit cards. Figure out how much you can budget for that each month, pay the minimum on everything, then allocate the rest toward either your smallest debt or your highest-interest rate debt. The latter lets you pay off individual accounts less frequently with this method, but you end up paying less overall.

You can also choose to do debt consolidation which can lower your monthly payment. However, this can cause your credit score to dip more.

Personal Loan for a Self-Employed Borrower With No Income Proof

If you don’t have proof of income, you’ll want to focus on alternative sources of lending. For example:

Peer-to-peer lending lets you fill out an application and match with an individual investor. You get a risk rating based on your credit score and that determines your interest rates. These types of loans can be an attractive alternative to traditional loan models.

Credit unions operate within a member-owned model. If you belong to the credit union, you can get a no-income loan and borrow from a pool of money that consists of other members’ deposits. Credit unions exist to serve their members, so they tend to be more willing to work with people who have alternative income situations or are temporarily unemployed.

Home equity loans are a type of second mortgage loan that may be available for those who want loans for self-employed individuals or independent contractors, but you’ll need very good to excellent credit. If you go this route, expect to pay high-interest rates. And be very careful only to take the no income verification home equity loan if you’re sure you can pay it back because you could lose your home if you default.

Sale-Leaseback: Get the Money You Need Without Borrowing

Another way to liquidate your home equity is to sell your property, but then you have to find a new place to live. Moving is expensive and time-consuming in the first place and when you add in leaving the home you love, it gets emotional as well.

To help homeowners avoid this trap, sale-leaseback solutions allow you to sell your home and remain in place as a tenant, paying rent until you’re ready to buy back the property or move.

You simply convert the equity you need – typically within just a few weeks – and you don’t have to leave the home you love.

The application process is straightforward and the terms are clear.

Key Takeaways

If you need a personal loan with no income verification, there are options available to you. Keep the following key takeaways in mind when weighing them.

Unsecured Personal Loans: If you’re in need of a personal loan but lack proof of income, consider unsecured personal loans as a viable option.
Bad Credit: Even with bad credit, you can explore alternative solutions like peer-to-peer lending, sale-leasebacks, and credit unions to secure the funds you require.
Repayment Term: Understand the importance of the repayment term when taking out a personal loan, especially when traditional income verification is challenging.

Speak with a financial advisor today to learn more about which solution you should use.

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