Loans Without Proof Of Income – What Chances Do Borrowers Have?
It is regarded as the “golden rule” in the credit industry: if a consumer without a fixed income and proof of that income applies for a loan, the bank will reject the application. But is this really the case? Do consumers without proof of income really have no chance of getting a loan? Not quite…
It is common knowledge that banks attach importance to various criteria before granting a loan. At the same time, it is perfectly understandable that financing is only granted if the appropriate collateral is provided. Who would (apart from providing assistance to relatives or friends) lend out even tiresome savings if it is not clear whether the money will actually be repaid as agreed? And so, in addition to the Schufa query to check current creditworthiness, it is primarily regular income that lenders include in their checking procedures. Those who apply for loans without proof of income must in most cases reckon with some time being spent despite objective credit comparisons. This is because loan offers without salary and general income proofs are rare.
Some customer groups find it difficult to provide proof
This shows a parallel to loans without Agency, which are also rarely granted on the UK market. In both cases, however, the rule applies: they do exist. And this is important, because there are several target groups that cannot prove a regular, fixed income from dependent employment.
- Students and pupils
- Freelancers and self-employed persons in general
At first sight, it may appear that recipients of state benefits during (temporary) unemployment could easily provide evidence of stable income. The problem, however, is that in the vast majority of cases, banks and credit institutions do not accept and take into account precisely this income as income. This often applies to unemployment benefits as well as to the so-called Hartz IV benefits and other social benefits. This is partly due to the fact that entitlements in this context can change, for example as a result of sanctions or changed family circumstances.
It is true that working people can also find themselves in difficult situations. But it is precisely for this reason that banks reduce the risk of change by insisting on permanent employment contracts and regular income in the majority of cases. An exception is the rare loans without proof of income.
Creditworthiness often even more important
Helpful in a way when looking for a loan without proof of income: a small amount of financing. From the point of view of the banks, micro and small loans simply represent a lower risk than an instalment loan of 20,000 GBP or more. The more money you want to get, the more closely the responsible service staff on the side of the banks will look.
By the way, this does not only apply to the proof of income, but to the same extent to the creditworthiness – the so-called credit rating, which is usually determined by an inquiry to the Agency, the largest credit agency in the English-speaking area. In an emergency, entries in the register of the Agency – apart from the relatively rare Agency-free loans – can lead to rejection even for manageable credit amounts. Whoever has no encumbrances has a good chance of success with the credit application.
A few bank statements are often sufficient
For the rest, a misunderstanding should be cleared up at this point. Some borrowers with no previous experience fear the difficulty of compiling all the necessary documents required as proof of income. In reality, however, the amount of work is usually limited. At least for permanent applicants who are employed on a permanent basis. The requirements for proof of income are usually minimal. Bank statements for the past two to three months are standard. In addition, banks usually require the submission of tax assessment notices for the past two years. Together with the approval of the Agency inquiry, this is usually already the entire expense.
Small amounts of loans are granted unbureaucratically
In many cases, however, things become more difficult when the self-employed, companies and freelancers need loans. They often have to submit comprehensive utility bills and other documents. In the area of business loans, interested parties usually look in vain for loans without proof of income. Exceptions can also be very small desired sums from the area of micro and mini loans, which are repaid within a few weeks. Schufa alone can be the only basic prerequisite for the granting of such loans. If a credit assessment is not even carried out, this often goes hand in hand with higher interest rates. Exact comparisons therefore have priority over the conclusion of the contract.
Evidence also serves as borrower security
When it comes to the question of selection in the area of loans without proof of income, it must always also be a question of explaining why banks insist on submitting various documents at all. On closer inspection, the documentation on pay slips and income as a whole is always in the interest of the applicant. Finally, banks can use the data and their experience to determine whether borrowers are up to the task of repaying the loan.
Some borrowers tend to overreach themselves financially. Consumers can use an objective household calculator to find out for themselves what economic burdens they face each month. Not everyone knows how much is actually left over from their income each month. Banks put their finger on the sore spot in this regard. Proof of income is therefore a security for both parties to the credit agreement.
Mailing is no longer the only alternative
If you are looking for a loan without proof of income, this is often simply because the account has no regular receipts. Otherwise, this practice of checks by banks and credit institutions is actually against it. Especially consumers who use online banking make it pleasantly easy for lenders today. Various digital procedures enable banks to view account movements directly. From a data protection point of view, this may attract critics. But bureaucratic and time-consuming, such options make the application for a loan noticeably easier.
For this reason, more and more customers are relying on the service to save themselves the trouble of copying and sending account statements together with the signed loan agreement by post. The digital transmission of proof of income is also becoming increasingly popular, which also speeds up the procedure.
Online loans: consumers can send documents digitally
The often cited advantage that preparation is particularly time-saving in the case of a loan without proof of income is only partially apparent in the case of applications via the online site of a bank with digital sending of the documents and proof of identity via “VideoIdent”. Nowadays, applications can be checked, non-binding commitments drawn up and binding contracts concluded within a few minutes. However, the circle regarding the necessity of offers without proof of income closes at the latest when needy people belong to one of the groups mentioned at the beginning, who either never or temporarily cannot provide proof. Anyone who needs a loan to finance, for example, the driving licence required for a job or a motor vehicle will find few alternatives on the credit market. In the end, loans with no proof required may be the only chance for (re)entering the working world.
A part-time job, but no written proof of income?
By the way, students and pupils of full age who want to receive money from the bank are not always unemployed. Typical in this area, however, is that there is not always an employment contract for tutoring, catering and other types of part-time jobs, for example, and there is no clear proof of income. Unfortunately, this fact does not make it easier to take out a loan.
If, on the other hand, you have just signed the employment or training contract and are waiting for your first salary, you will also be forced to make an exact comparison and apply for a loan without proof of income. Presenting the employment contract can be helpful in individual cases to increase the chances of a positive decision.
Transparency is important even without income documentation
With a credit comparison, at any rate, you will land relatively quickly with verifiable-free financing models – if you laboriously search for offers on your own, you will miss out on many a loan without proof of income, which is presented to you by brokers or credit calculators. In summary, one aspect is important: just because you only want to shortlist providers of loans without proof of income, seriousness is essential.
This includes as an essential point that you should never make an advance payment for the mediation of loans. Respectable brokers earn a commission, which is only due after the successful conclusion of the contract – and is usually paid by banks, not by the borrower. Here, however, there may be different conditions, especially for portals from abroad.
Personal loans: mutual trust instead of documentation
If the loan comparison shows that you cannot get a loan at fair interest rates anywhere, you still don’t have to bury your head in the sand. Then, with a bit of luck, you can borrow from relatives or friends, perhaps even from your employer as an advance. Or you can seek out agents who arrange loans from private to private. Because even there, you can possibly get a loan without. In this case, however, you will have to present your reason for financing particularly well in return, as this, along with the annual effective interest rate and creditworthiness, will be decisive for the chances of obtaining a loan.