In one way or the other, you may need to get a loan to cover different things at some point in life. However, the loan application process can be complicated depending on the type of financing you want and the lender. For you to get approved for a loan, different documents may be required. If you fail to provide the right documents as well as accurate information, your application can possibly be rejected. Here are some common documents needed when applying for a loan to bear in mind.
Proof of Identity
First and foremost, the lender wants to know the exact person they would be dealing with. Cases of identity theft are widespread, hence, financial institutions do not want to fall victim to this crime. Therefore, you must provide verifiable identification showing that you are a citizen or a permanent resident in the country where you are based. You should also be above 18 years, and you can provide any of the following forms of identification:
- Driver’s license
- Birth certificate
- State ID
- Military ID
- Certificate of citizenship
Most lenders would request your credit report when you apply for a loan. This document demonstrates your history of paying back loans on time and in full. However, a poor credit score does not necessarily mean you would not get approved for a loan. The lenders may approve your loan application, but it will come with higher interest rates, and others may offer smaller amounts. You need to separate your business credit from your personal credit history.
Proof of Income
Lenders are in business, so they will need to check the borrower’s income first to determine their capability to repay the loan. There are different forms of documentation to prove your income that your lender may request. If you are employed, you need to provide your recent payslip. Alternatively, you can also offer pay stubs, and these reflect the money that you have recently earned. You can also choose the right tool for generating your own paystubs to verify your income and the employer must sign it. You also need to provide other supporting documents if you get other forms of payment like overtime compensation.
If you are applying for a business loan, you need to provide income tax returns. This helps the lenders to evaluate the deductions that you have claimed and the income you reported. For self-employed people, they should provide additional documents like profit and loss statements or balance sheets. Your profit and loss statement details the historical flow of cash in the operations of your business. An income statement is crucial to the lender since it clearly shows the revenues received and the expenses. If you are applying for a business loan, all lenders will be interested in viewing your income and loss statement. Additionally, the small business lenders will also be interested in checking your recent bank statement to see if they reflect the same figures portrayed in the income and loss statement.
Depending on the type of loan that you want, various lenders have different loan application processes. For instance, if you want a mortgage loan, you should get a pre-loan approval from the lender. When applying for a personal or business loan, you still need to complete the application online or in person. The loan application comprises your basic personal information, the purpose of the loan, and the total amount that you want. You must provide correct and accurate details on this document.
Proof of Address
Proof of address can help the lender establish the quality of your lifestyle and your ability to repay the loan. The following are some of the documents you can use:
- Proof of insurance on your home
- Utility bill
- Lease or rental agreement
- Voter registration card
If you want to change your address, your local postal service can provide you the assistance that you may need. You need to ensure that the address you provide is verifiable to avoid inconveniences that can affect your loan application.
When applying for a loan, the lender will request specific documents that should accompany the application. However, the documentation required varies depending on the financing option that you want to get. There are different types of loans, and the popular ones include personal loans, mortgage loans, automobile loans, business loans, and others. The required paperwork may also vary by the lender. Therefore, you should talk to the lender first so that you get all the requirements for applying for a loan.