You will need proof of income when you apply for a personal loan. Proof of income is an important part of a personal loan application, as it shows a lender that you will be able to make your monthly payments and ultimately pay the loan back.
You may be asking this question, if you don’t have a traditional nine to five job that comes with a pay stub— what is the most common way to show someone how much you make? The good news is that all kinds of documents and paperwork can be used to verify income, which also means that there are several kinds of income sources that may be accepted by your lender.
For example, when applying for a personal loan, you can use bank statements, invoices, letters of income, reward letters, tax returns, and more! If you are unsure about whether a document will work, it will be best to ask your lender about it before submitting it—as an unacceptable document can add more time to the application process after submission.
Even if you are able to prove your income, sometimes it may not be enough to take out the loan amount you need. The good news is that you can add a cosigner or co-borrower to your loan application to increase your chances of getting a higher loan amount.
Along with your income, your credit score and ability to repay the loan will be two major factors looked at for loan approval.
Your credit score is a number that represents your credit history. Your credit history is listed on all three credit reports from the major credit bureaus. By taking a look at your score, lenders will get a quick idea of your financial habits, which they can use to determine approval and loan amount.
Your ability to repay a loan encompasses various factors including your income and credit history. Lenders will ask about existing debt and monthly bills to gauge whether you will be able to repay the loan on time.
All these different factors help determine loan approval when applying for a personal loan.