Proof of Income showing you can relay a loan
You can likely get a title loan refinance, but you’re going to have to show that you make enough money to repay your loan. In other words, you need proof of income. Typically, that calls for pay stubs, bank statements, or tax return documents. There are also paperless verification methods that you can use to demonstrate that you’ve got the income to cover your debt. Here’s what you should know about proof of income.
What is Proof of Income?
It’s documentation used to verify a borrower’s earnings or income level. In this case, it’s used to evaluate the capacity to make loan payments.
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Common Documents Used to Prove Income
Some of the most common ways to prove income include:
Your Pay Stubs
The most common way to prove employer-paid income is through what’s called your pay stub. This document, which accompanies each check, details your pay for the most recent pay period, in addition to your earnings to date. It shows hourly wages earned or your salary, including any tips, overtime, and any commission pay. Your stub will also list all pay deductions, including FICA and income tax withholdings.
Lenders like to review pay stubs since the documents show your net pay for the period, less deductions. They see the amount of income you have available for loan payments.
Employment Verification Letter
This document is prepared by your employer and is used to verify salary or income as well as employment dates. It can also verify your job title, eligibility for rehire, and previous salaries.
Lenders can use the document to help determine whether you have a steady income to handle monthly payments. Or you may be seeking a loan payment reduction, and the bank asks to see proof of income before granting the request.
If you’re the one writing the letter, the contents of which the employer must confirm, basic info should include the company’s name and address, your name, employment dates, and current or former job title and description. It should also have your employment history and current salary, including any raises or bonuses.
Bank Statements
This document, prepared by the financial institution monthly or quarterly, is a record of all financial activity for your account over a certain time period.
A bank statement will include your name, address, and bank branch details. It will also show your transaction history, including deposits, withdrawals, and any transfers, in addition to fees and interest earned. Further, the document will include your opening and closing balances for the statement period, and any pending transactions, refunds, or overdrafts.
Lenders sometimes request your bank statements to not only learn more about your finances, but your spending habits as well.
Tax Return Documents
These documents offer lenders a comprehensive picture of your financial situation over an entire year. This info is frequently pulled from W-2 or 1099 forms.
Your federal tax returns show not only current income but overall income history, including unearned income. Most lenders want to see around two years of tax returns before considering you for a loan.
Other Acceptable Proof of Income Documents
Some lenders may accept paperless verification of income instead of the traditional documents. This means using digital methods to verify income electronically, usually by giving a third-party service access to your bank statements or other online records.
Other forms of proof of income can include an investment account statement, an alimony or child support judgment, Social Security award letter, pension distribution statement, official statement from a trust manager, and more.
In Summary
If you want a loan, even a car title loan, you’ll be asked to show you can repay it. The good news is that you have plenty of options. It’s a good idea to keep this list for when you need it.
