By: Raymond James
About the Author:
Ray is a sought after thought leader and an expert in financial and money management. He has been published and featured in over 50 leading sites and aims to contribute articles to help novice financial planners. One of his goals is to impart his knowledge in finance to educate and help ordinary people create and achieve their financial goals.
When applying for any loan, your choice of lender determines what kind of documentation you are requested to produce. For unsecured loans, most of which are referred to as personal loans, the documentation required is pretty much similar. Due to the lack of collateral, lenders usually consider this kind of loan risky. The repayment of the loan is generally dependent on your credibility as a borrower. Banks and other lenders, therefore, have to request that borrowers looking to access unsecured loans produce several verification documents in the application process. Prior preparedness to answer any queries and produce all relevant documentation make a significant difference in loan application duration.
Some of the questions that any borrower interested in unsecured personal loans should expect include:
How The Money Borrowed Will Be Used
Not that the lender is in any way interested in what way you want to put the money into use. Most lenders are only interested in recommending the loan package that suits the borrower’s needs best. For personal loans, you can use the money for almost anything, ranging from education funding, and financing business to even whimsical spendings like buying a boat or a Hawaii vacation.
How Much You Plan to Borrow and For How Long
Even if you are approved to borrow more than you need, it is always a bad idea to do so. The lender will always ask how much you need and how you plan to make payments. It is always imperative to equip yourself with a solid payment plan that you are sure you can keep up with. The lender will, however, ultimately use your financial health analysis to determine the amount they can offer you.
Below are some of the most important documents that you should have at hand when going in for that personal loan applications.
Loan Application Form
To initiate the loan application process, you must fill in a loan application form. This can be done through an online portal of the lender’s website or physically on-site.
Due to identity theft reasons, most lenders require that borrowers produce two forms of identification. Apart from identity theft, lenders are keen to know if you are eligible to do business with them. Through identification documents, lenders can determine if you are a permanent resident or a United States citizen. You should also have attained the legal age of 18 years to make a loan application. You can produce any two of these identification documents;
- Birth certificate
- Certificate of citizenship
- State issued ID
- Driver’s license
Unlike other types of loans with collateral backing, unsecured loans increase the lender’s risk significantly. This makes it very necessary for any lender to verify if, indeed, a borrower can finance payments of a loan by checking on his income status. You can use the documents below to verify your employer and income status.
- Last two paystubs
- Last two months bank statements
- Most recent tax returns
- Last two years of W2s and 1099s. some lenders may prefer these over tax returns
- Employer’s contact information
To determine the stability of your lifestyle, your lender may need to know where you stay. The locality you reside in is always a good indicator of your living condition, which might be of interest to your lender. Some of the documents required as proof of address are;
- Rental or lease agreements
- Voter registration card
- Utility bills
- Home or vehicle insurance
Job Continuity Proof
If your current employer has not lasted for more than two years at the time of application, lenders may ask for the job offer letter or a letter from the HR department indicating that you are in permanent employment.
One of the major reasons why personal loans are preferred by many is that it is ‘personal’ and can be used for anything. The lender is in no place to dictate what you do with the money. Unlike the other conventional loans, the approval of unsecured loans is much quicker. This is especially true for Online Unsecured Loan applications. Personal loans generally have a lower interest rate than credit cards, which makes unsecured loans even more attractive. There are many types of lenders, such as banks, credit unions, and online lenders offering unsecured loan packages.