Income verification (aka proof of income) is a means service providers rely on to check whether or not a consumer can pay for their products or services. It’s especially important for banks and lending companies, as it helps them determine if a potential client can repay any loans they take out.
But what if you don’t have any proof of income? How can someone enjoy no income verification personal loans? Find out the answers to these questions below!
The TL;DR answer to this is yes. You can still take out any loan even if you don’t have proof of income. Bear in mind, though, that most banks and lending firms include income verification as a main requirement for enjoying their financial products and services. Moreover, if you can’t repay the loan, you might put your financial health (your own or your business’) at risk.
As mentioned above banks and lending firms usually require income verification for their loan products or services. However, provided you don’t have any proof of income, you can still have a shot by doing the following:
As put by Investagram, a credit score is a number ranging from 300 to 850 that shows a consumer’s creditworthiness. Basically, the higher your credit score is, the better your chances of getting a loan even if without income verification.
The FICO model is currently the most heavily used chart when it comes to determining credit scores. According to the diagram, creditworthiness fall into five distinct categories:
|800 to 850
|740 to 799
|670 to 739
|580 to 669
|300 to 579
For your loan application to have a fighting chance even without proof of income, best make sure you have a credit score of at least 670 or more.
One of the mistakes people make when applying for a loan is assuming credit scores and credit history are one and the same. But they’re actually two different things.
While credit scores quantify your creditworthiness, credit history focuses more on your financial activity and current situation. Because of this, a person’s credit score is heavily dependent on their credit history. Moreover, moneylenders also review a potential client’s credit history whenever they apply for a loan
So if you want to get loans without income verification (not to mention boost your credit score), better make sure your credit history is as pristine as possible.
While most secured loans might still require that you present proof of your income, they’ll focus more on the asset you’ll pledge as collateral. It also offers an easy way to boost your credit score and improve your credit history. Depending on the asset you present, you might even end up enjoying more money, lower interest rates, and flexible repayment terms. So if you want to present a collateral in lieu of income verification, better weigh the pros and cons first.
However, bear in mind that collateral loans have their downsides, too. Chief of these is the fact that your asset might be seized by the lender in case you can’t repay the money you borrowed. Moreover, application processes for secured loans are somewhat more complicated than those for traditional loans or even an unsecured working capital loan.
A guarantor is a person who promises to return a borrower’s debt in case the borrower is unable to for one reason or another. As a sign of good will, they will usually present their own proof of income or collateral. So if you have neither proof of income or collateral to present, and you find your credit score and history lacking, finding a guarantor is a great option for you.
That being said, getting a loan with a guarantor comes with several risks. For one thing, if you fail to make repayments (or do it late), it can have a negative impact on your credit ratings as well as the guarantor’s.
Interest rates for guarantor loans are not exactly low either, meaning you might have to pay more just to afford it. But more importantly, if you fail to return the borrowed money, you could end up tarnishing your guarantor’s financial health. This could ruin your relationship with them.
Last but not least, you can present proof of any alternative income aside from your main job. These include your Social Security benefits, public assistance funds, dividends from your investments, payroll receipts from your part-time gigs (if any), and even your federal tax return documents.
Be sure to present these to the bank or lending firm if you’re applying for a loan without proof of income. Combined with a good credit score, credit history, a guarantor, and a collateral, these will help improve your chances even without income verification.
Wrapping up, you’ve learned that you can apply for a loan even if you don’t have any proof of income. Aside from income verification, banks and lending firms also look at factors such as credit score, credit history, collateral (for secured loans), and guarantors (for guarantor loans) when determining a potential client’s creditworthiness. So make sure you have all these in case you want to bypass the income verification part.