When you’re shopping for a loan, you’ll notice that almost every lender requires proof of income before granting you a loan. Your proof of income is an important document for landlords, banks, or anyone who is considering lending to you. Even small personal loans will require you to show some form of proof of income to show that you can pay back the debt.
Please remember personal and pay day loans can be damaging to your finances. Always remember to read over the fine print carefully and make certain you review and understand all of the details before signing. These types of loans should only used as a last resort for those who have exhausted all other options.
What is your proof of income?
Your proof of income is an official document that demonstrates to lenders the amount of money you make. While it’s all well and good for you to tell lenders what you make, your proof of income is just that: proof that you make what you say you make. Often, you will be asked for proof of income letter, which is supplied by your place of employment. This will usually be provided by your human resources department or finance department and can include information like how long you have worked there if you’re a salaried or hourly employee, how many hours you work, and of course, your annual income.
Your lender may also ask for supporting documents, like pay stubs and bank statements to further prove your income.
What can be used as proof of income?
While the most common form of proof of income might be from employers, however, other documents can be used to show what you earn. Whatever the document, they will have to show your full name, some additional identifying information like your social security number, the date it was issued, the employer’s name, and the date.
If you don’t have a traditional employer, here are some other documents you can use to prove income:
If you’ve been regularly filing taxes, your last year’s tax return can serve as some proof of income. However, you need to keep the tax forms handy, or they can be hard to get access to when you need them quickly.
Social Security Proof of Income Letter
If you are currently experiencing a period where you are receiving funds from a government source, these documents can be used as proof of income. However, you will need to show that you will be back on a steadier income to qualify for most loans. A Social Security Proof of Income letter can be printed online if you are currently receiving these payments.
Workers’ Compensation Letter
Further to the above statement, Workers’ Compensation payouts can also help you qualify for a loan. You’ll be receiving these payments if you were injured on the job and are unable to continue working. You can get these statements from the insurance company tasked with dealing with the claim.
Bank Statements or Wage and Tax Statement for Self Employed (1099)
If you’re self-employed, proving your income can be a bit more difficult. However, you can use your Wage and Tax Statement for Self Employed (Form 1099) to demonstrate the wages you earned and taxes you paid as a self-employed individual. If you have a history of steady deposits, you can also use your bank statements as secondary documents to help prove income.