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Taking out loans? Proof of income may be necessary

If you were a bank, would you just lend money to anybody, with only a promise as a guarantee that it will be paid back? Probably not. Instead, you would want to see solid evidence that the person has the financial means to pay the loan before you race ahead and throw money at them. You would want to know if they have money coming in regularly that allows them to make repayments and manage the rest of their economic responsibilities accordingly. If you think this way, you are absolutely right to do so. It works this way in the real world!

In most cases, no matter what amount of cash you ask for, or if they are short term, mid-term or long-term loans, proof of income must be presented to the bank or financial institution to which you are applying. You need to prove that your salary allows you to cover the loan amount you have requested, plus leave enough left over for you to support yourself and your family.

How can you prove your income? Well, this varies from bank to bank, so you need to check with them directly exactly what documents you should provide. Here are some of the more common forms of proof. For some lenders, a simple bank statement can suffice as long as it demonstrates a steady income. For others, tax return documents can be fine. Verifications of Employment certificates are also quite useful but they can take a while to obtain. You can also show any child-support or alimony payments (if applicable) to your lender to show that you have regular money entering your bank account.

Can you get a loan with no proof of income? Well, in some cases, yes you can. If you have an excellent credit rating then you can take out a signature loan without proving your income. If you are after a mortgage loan, then you can request a stated income mortgage. You have to write down a number that represents the total money you earn, monthly or annually and formally sign it. This is considered as your income documentation, and there is no need for this to be confirmed or verified.

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