Getting a loan can be a long process, especially if you’re new to it and don’t have much in the way of collateral. But to get approved for the amount you need, it’s essential to make sure that you have all the following documents when applying at your local bank branch. With the help of this guide, you’ll know exactly what kind of information and documentation to bring.
- Legitimate Reasons for Getting a Loan
Some of the main reasons to request a loan include:
- Regular monthly income that you can confirm with pay stubs (or other evidence).
- No late or defaults on existing loans.
- Active checking account with sufficient funds to cover at least one month’s worth of living expenses.
- No outstanding debts you don’t plan to pay off in a reasonable amount of time.
If you plan to take out a personal loan no collateral, some banks may allow you to use your credit score as collateral. Generally speaking, bank loans that require only a financial statement tend to have lower interest rates than secured loans that involve putting up property (like an automobile or home) or using cash as collateral.
- Documentation of Income
Proof of income, such as past 2-3 years’ tax returns with all W2’s and 1099’s. Be sure to include copies of pages 4 and 5 from each return (this is where your adjusted gross income is located). Also include proof of other self-employment earnings you may have had over that period.
- Documents of Expenses
When you’re about to start a business, collecting documents that show your financial position is essential. These documents will prove that you have enough funds to start your business and that you can maintain yourself until your new venture is on its feet. It’s a good idea to keep these documents in case of an audit. Here are some things you may want to include
- Credit report
This report provides an overall picture of your credit health. The three main credit bureaus that supply these reports are Experian, Equifax, and TransUnion. If you apply for a loan, most banks or lenders will pull a copy of your credit report from one or all three of these sources to gauge your financial health and determine whether you are worthy of their loan offer.
Unlike secured loans, backed by collateral like a home or car and guaranteed by a credit union or bank, unsecured personal loans are not supported by any assets. Instead, your income and credit history act as collateral to secure your loan. According to Lantern by SoFi, these loans may be ideal if you need fast cash with no assets required to secure your loan.
- Proof of Citizenship
Banks want to know they’re making loans to people who are citizens or residents of a country. The easiest way to prove your citizenship is with a passport, but if you don’t have one—or it’s expired—you may also provide a birth certificate or citizenship card.
Always put yourself in a bank’s shoes. Banks want to lend money to people who can pay it back with interest, so they’re looking at credit scores and income.