When applying for a personal loan, you should consider all the documents you will need for approval, including your proof of income.* Lenders often request a proof of income as a way to verify the borrower’s ability to repay the loan debt. However, proof of income can mean many different things depending on the lender.
Why income is part of qualification criteria
To get the full picture of a borrower’s ability to repay their debt, lenders typically require proof of income. They may also ask for proof of employment that will demonstrate you have a steady job and therefore a solid stream of income. If you do not have a steady job or are self-employed, you may be required to submit some other evidence showing how much you have in your bank account or how much money you make each year.
Proof of income requirements
Lenders often have various requirements when it comes to proof of income. Some may ask for one document showing your income while others will ask for several. What qualifies as proof of income may also vary, so what is acceptable at one lender may not be for another.
Proof of income received from your job
- Pay stubs: Employers may provide you with a pay stub, also known as a pay slip or paycheck stub. You can use this as proof of income, providing details about your employer as well as how much money you made in a given pay period. Some lenders could also require that a pay stub is dated within 30 days of the date when you apply to get the most recent evidence of your income.
- Payroll schedule or documents: When you work for a company that issues payments irregularly, such as for contract or freelance jobs, you might also be able to submit a payroll schedule so lenders know you will have sufficient funds to repay the loan.
- Signed letter from your employer: Other lenders might ask you to send a letter from an employer stating you work for the company. This would function to prove a source of income and capabilities of repayment.
- W-2s: As a crucial tax document, a W-2informs lenders how much you made in a given year and at which employer.
- Tax returns: If you are self-employed, tax returns are necessary to confirm the income listed on your application.
- Direct deposit statements: If you have set up direct deposit with your employer, these payments will show up in your bank statements.
- Statements showing retirement income: Lenders might also ask that you show proof of income if you qualify for Social Security payments, or have other income during retirement. A bank statement should show you receive money from the U.S. Social Security Administration. You could also state that you receive supplemental income from another source, such as an investment, or a retirement savings account.
Consider the length of the application process.
Before you narrow down your list of lenders, determine how long it will take for them to approve your loan. Factor in which documents you’ll need and how long it will take to obtain them. Proof of income, like a signed letter from your employer, may be difficult to come by in the time you need. Also, take into account the processing time for the lender to approve and deposit the funds into your account.
What is different about LoanMe?
Compared to traditional financial institutions and other alternative lenders, the application process at LoanMe is streamlined for borrowers. While some competitors may need several proof of income documents, or other papers like W-2s, LoanMe only requires minimal application items. One pay stub, bank statements for your proof of income, and a valid form of ID will get the process started at LoanMe.
There may be a few instances where borrowers need to send in additional items. LoanMe’s online application process allows you to send scans of your application materials to complete the process. This means you can enjoy the convenience of applying for financing without leaving the comfort of your home.
*This article has been prepared for general information purposes only. The information presented is not legal, financial, tax or accounting advice, is not to be acted on as such, and is subject to change without notice. Credit approval is subject to LoanMe’s credit standards, and actual terms (including actual loan amount) may vary by applicant. LoanMe requires certain supporting documentation with each new application. If you have any questions regarding this, call us at 844-311–2274. California loans are made pursuant to LoanMe’s California Department of Business Oversight Finance Lenders Law License #603K061. LoanMe also offers loans in certain other states which may have higher minimum loan amounts. Copyright © 2015 LoanMe, Inc. All rights reserved.