It seemed quite impossible to get a loan without a solid document that showed the borrowers income e.g. W-2( employee income) forms, income tax returns e.t.c. until 2008 when the stated income loans was introduced by Ameriquest. The stated income loan just requires the borrower to state their income without due verification. This has earned it names like Liar's Loan or Liar Loan. The Loan is mainly designed for self employed borrowers who may not have due documents to verify their income.
As stated earlier, the lenders do not require tax returns or IRS documents or even a proof of employment. However, the loan application is received based on your ability to afford a stable and constant monthly payment, a good cash reserve; all this is based on the information provide to your lender. It is very simple to apply for the state income loans due to the lack of real verification, this makes it popular admist borrowers with a wide range of credit histories.
The stated income loan agrees with situations that a normal standard loan will not approve e.g. unlike normal loans, the stated income loans allow for a borrower to get no more than the size of the person's income.
It is huge risk on the side of the lender therefore the stated income loans come with high interest rates to make up for the risk and sometimes the interest rates are about double or triple normal loan rates. It is however more reasonable to pay it back in a short period of time that stretch out its payment. Some banks , especially local banks would only offer a stated income loan based on a stable employment, about 40% equity position and a good FICO.
The rules that come with accessing a stated income loan vary from state to state. Some banks require the borrower to provide a bank statement or proof of cash flow from other sources.A good credit score is an added advantage . All this are requested by banks or lenders in a bid to reduce the risk of a non-payment as they are at a high risk with the stated income loan.
A bad credit score will often result in lenders requesting for a higher interest rate in a bid to make of for the risk. Try to have a conversation with the loan officer at the financial institution to encourage the lenders you are quite reliable. If it is being done online, you can still maintain optimum communication by mails and other means.
The mode of verification is dependent on the lender as different they have different modes of operation. In conclusion, just like other types of loan, you have to take your time to plan adequately to decide if a stated income loan would best fit your need. Get a pen and paper and draw out a reliable plan. Ensure your plan would prevent bankruptcy, stress, court cases or further complicate your financial state.
My name is Elain George and I work as a loan officer at a credit union. My duties include the evaluation and authorization of commercial, credit, home loans e.t.c. my relation with clients and gathered experience has proved valuable in advising borrowers on mode of payment,financial status and most suitable loan to cater for their need without any repercussion on their finances. I have a blog that is mainly for questions and answers to help clients resolve loan issues.
Payday Loans are made available to responsible borrowers who need financial support to cater for emergency needs to be repaid when the borrower receives their next paycheck.It can also be called a payday advance, pay roll loan, small dollar loan, cash advance or short term loan considering a payday loan.
. It is also called unsecured loan s its repayment may not be linked to the borrowers pay day. It thrives on giving loans only to borrowers with a good credit score, previous pay roll and employment record. Although, the credit score is rarely used, but lenders that would require it use it to determine the borrowers creditability. The rules in different region and state about the payday loan differ but these rules are put in place to prevent unreasonable and excessive interest rate.
The process is simple. As the repayment of the loan is dependent on the borrowers employment state, the basic form of verification for the loan approval is of the employer or income via bank statement and other means e.g pay stubs. This rule is an exception to some lenders as they all have their individual prescribed mode of verification.In past times, borrowers could secure a payday loan by a visit to the payday lending store, the borrower fills out a post dated check for repayment with additional loan fees.
Sometimes the borrower can run into more debt if the loan is not paid on the due date and the check bounces. Delayed payment incur additional charges or an increased interest rate and in some cases, both.
The check is to be redeemed by the lender if the borrower does not repay the loan on the agreed date.In recent time, borrowers can apply for a payday loan online; 24/7, at any time of the day or night.
The required documents can be faxed to the lender and the money is deposited directly into the borrowers account and the repayment is electronically withdrawn on the borrowers next payday. The whole application process is fast and can take no less than one hour.