Personal Loans
Getting a personal loan with no income verification can be tricky, but it is not impossible. In fact, there are many ways to increase your chances of qualifying for a loan, besides having a traditional income.
What Exactly is a Personal Loan?
A personal loan is perfect for getting a bit of extra cash, especially if you need it relatively quickly. But getting a personal loan with no income verification can be tricky.
Let's start with some of the different reasons why you might need a personal loan:
Making it to your next paycheck when funds are especially tight
Paying for a vacation or honeymoon
Funding your new business (alternatively, you can apply for a business loan)
Consolidating debt
Paying off unexpected medical bills
Buying that fancy computer (or another big-ticket item) you’ve always wanted – wait, is that just me?
Whether it’s for something you need, want, or a little bit of both, getting a personal loan means getting the funding you need quickly.
What a Personal Loan is Not
However, personal loans do have their limits.
For example, you usually cannot get one if you’re looking to put down a downpayment for a home, or if you want to buy property outright. If a house is your goal, consider getting a fixed-rate conventional mortgage instead.
Another area in which you should not use a personal loan is to pay back student debt.
Why? Because student loans tend to have lower interest rates than most personal loans. Additionally, student loans often offer forbearance or deferment options; if you get a personal loan instead, you run the risk of losing these options.
What to Expect When You Apply for a Personal Loan
There are several things you need to consider before you apply, things any potential lender will need before they give you the OK on your loan.
To increase your chances, you need to have documentation in order. But that’s not enough on its own, not when you need a personal loan with no income verification. Most of the time, a lender will require more from you.
This includes:
Proof of income (don’t worry – we’ll get to that in a moment)
Proof of your ability to pay the loan back based on the terms of the agreement
A solid credit score
Your reason/s for needing the loan
It might seem strange that you need to provide your reasoning for the personal loan, but what you plan to use the money for can mean the difference between your application’s approval or rejection.
Here are some examples of why someone might want a loan… and the likelihood of someone with these reasons succeeding or not.
(As a note, these outcomes are higher when you’re applying for a personal loan with no income verification).
You need to pay rent this month (more likely to succeed)
Consolidating your debt is the only way to get a handle on it and improve your financial situation (more likely to succeed)
You want to take your significant other on a trip to Hawaii (less likely to succeed)
You have a bad track record of paying back your debts in time, if at all (less likely to succeed)
There’s an addiction you need to fund (less likely to succeed)
Whatever your reason, it doesn’t hurt to try! Sometimes a lender will be understanding of your situation.
And if not? There are other options.
Key takeaway: Knowing clearly why you want the loan can impact the lender’s decision to give you one.
Long-term Costs of Personal Loans
A personal loan from a reputable lender will have preset terms and a fixed interest rate. Sometimes, they’ll include a one-time cost or application fee as well.
According to a report in October 2020, the interest rate of a personal loan can vary based on your credit score.
For example:
10.45% APR if you have an excellent credit score (760+)
20.16% APR if you have a good credit score (680-719)
Ultimately, the higher risk you seem to be, the higher interest your loan will have. Personal loans can also include an origination fee that is up to 8% of the total balance, depending on your credit history, the amount of the loan, and other terms.
How Can I Get a Personal Loan with No Income Verification?
First, let’s define “income verification” or “proof of income.”
Despite what you might be thinking right now, there are actually multiple ways to show proof of income – aside from having a job.
You may be thinking that you need to be employed first since this tends to be the easiest way of getting approved. Luckily, this isn’t always the case.
Common Types of Income
Proof of income is simply this:
A way (or ways) of showing the lender that you have the means to pay back the loan. If you are employed, some common ways to provide this information include:
Pay stubs
Tax returns from the most recent year/s
Payroll verification
An employment letter (if you’re not yet making a paycheck, but know the intended start date)
W-2s from your job
But when you don’t have a job – or when you’re working as an independent contractor –, you may not have this information. That’s where alternate income comes into play.
Using Alternate Income to Qualify for a Personal Loan
Something important to remember is this:
There are other methods of having and proving your income than a traditional job
Alternate sources of income include but are not limited to:
Disability
Social security
Child support
Pension or retirement funds
Alimony
Trust fund money
Pending real estate/house sale
Savings account money
Interest or dividends
Other benefits (eg. Veteran Affairs benefits, public aid)
If you have other money coming in, such as unemployment benefits, this can count as well. Do make sure you are aware of how consistent these incoming payments are, however.
For instance, if you are on unemployment but it will end in 2 months, this may negatively impact your approval odds since a lender may view them as unstable.
A potential lender will typically check your financial records and verify any and all income sources you provide. So, dig deep. Any money you receive each month (or on a regular basis) can count in your favor.
If you have no job, no income records of any sort, and you simply have no money coming in, there are still ways to qualify for a personal loan.
Income verification is simply a part of the bigger picture. It isn’t everything.
Want a Personal Loan with No Income Verification? Improve Your Credit
A potential lender will look into more than just your income when deciding whether to give you the loan, particularly your credit score.
How do I Improve My Credit Score?
It goes without saying that the better your score is, the higher your chances of approval become. But do you know what constitutes a good credit score? What about an excellent one?
There are several ways to improve your credit score. The easiest one you can start doing right now is:
Pay down your credit card balances or overall credit utilization
If you find you are using more than 30% of your total available credit, try to pay that down before applying for a personal loan. This can be difficult to do, especially if you’re not making an income, but if you are not in a hurry to get a loan, it can greatly improve your chances for a future application.
An alternative is to get a new credit card, but not use it. This can raise your overall available balance while reducing your usage.
For example…
Say your total credit limit is $7,000.
Your usage is $2,500.
That’s a little over 35% usage (out of the recommended 30%).
If you get another credit card that brings your total credit limit up to $8,500, but you still only owe $2,500, that means your total usage is now 29%.
Other factors to consider regarding your credit score:
– Payment history (on time vs. late or missed payments)
– Collections or filed bankruptcies
– Credit age
– Hard inquiries on your credit report
Ready to get a Personal Loan with No Income Verification? Here are 7 Options
Whether you are self-employed, unemployed, or otherwise, there are different types of personal loans you may want to consider before you apply.
Here are the seven main ones:
Unsecured Loans
An unsecured personal loan (aka a traditional loan) is based primarily on your credit and financial information. According to the Consumer Financial Protection Bureau, this type of loan is riskier to the lender since it relies on you, the borrower, to pay it back without giving up any collateral in return.
Downside: If you default on the loan (meaning you fail to pay it back), you can be sued or the debt can be sent to collections.
Secured Loans
The main difference between a secured and an unsecured personal loan is that the secured loan is linked to an asset or collateral you as the borrower provide. Such collateral can include the equity on your home, your savings account balance, a vehicle that is paid off, an investment portfolio, etc.
A secured loan tends to be less risky to the lender because they can take this collateral as a form of compensation if you default on your loan.
Downside: If you don’t keep to your end of the agreement, you can lose your home, your car, and potentially more, while also hurting your credit score.
Payday Loans
This is a relatively popular, quick-approval loan that does not rely on your credit score. Payday loans tend to have short repayment terms (2 weeks – 6 months) and high interest rates. However, they are illegal in certain states.
Downside: The interest rates. Most lenders charge a flat fee of $10-30 per $100 you borrow. Say you borrow $400. That means you are paying between $40 and $120 in interest alone.
Payday Alternative Loans (PALs)
If you are a member of a credit union, you can apply for a PAL. These tend to come in smaller amounts and allow for longer repayment periods. Because the National Credit Union Administration (NCUA) regulates these loans, they can have lower interest costs as well. They also are often cheaper to pay back than payday loans.
A PAL has a maximum interest of 28% with a maximum repayment period of 12 months.
Downside: The borrowing amount is limited (often ranging from $200 to $1,000).
Cash Advance
A cash advance is a shorter-term, high-interest loan. You can get a cash advance from most credit cards.
Downside: Higher interest than usual and often a limited borrowing amount.
Debt Consolidation Personal Loans
To consolidate debt is to combine some or all of your loans/debt into one. Sometimes it is easier to handle just one bill rather than many, different ones, each with different due dates and interest rates.
Downside: Certain loans may have had an interest rate that was lower than the new, consolidated loan. Additionally, some debt consolidation loans require collateral, although this is less common.
Line of Credit
This is just a fancy way of referring to your credit card/s. Credit cards can be a great way to build up your credit score, and they are a personal loan that requires no income verification.
Downside: Credit card debt can rack up fast, so keep an eye on it. Interest rates, especially for people with low to no income can be extremely high (upwards of 28% in some cases).
Where Can I Apply for a Personal Loan?
Now that you know your options, you may be wondering where the best place to apply for a personal loan is.
Your Bank or Credit Union
Check out your existing financial institution. If you are already a member, it can increase your chances of qualifying, especially if you are in good standing. Plus, you already bank with them – getting a loan from the same place keeps your finances in one, convenient location.
Online Lender
There are online lenders you can go through as well. Sometimes, going through an online process can be quicker as well, though not always. That said, online lenders will often offer a personal loan with no income verification.
Tip: Weigh the pros and cons of several institutions before deciding. Be sure to check out their policies and terms before signing anything.
How Long Does It Take to Get a Personal Loan with no Income Verification?
Depending on how complicated or simple your situation is, it can take as long as a week for the money to come in. You can also be approved that same day, though this is more likely when you have some kind of income verification.
To ensure a faster, smoother verification process, have all your paperwork in order before you even start the application. The more prepared you are, the better your chances of qualifying as well.
What If I Still Don’t Qualify for a Personal Loan?
If you’ve done everything you can think of, and you still aren’t qualifying for a personal loan, there are still a few options available to you.
Get a Cosigner
Having a cosigner on your loan can help you qualify since the lender will consider their credit score and income alongside yours. However, if you are unable to make payments on the loan, your cosigner will also suffer the consequences.
Before you go this route, make sure you have someone you fully trust and that they understand any risks involved.
Reevaluate Your Expenses and Make a Budget
If you’ve never had a budget, or if you haven’t changed it in a while, now might be a good time to make or update it. There’s a good chance you’ll find areas where you can reduce expenses and save more money.
Further reading:
7 Main Types of Personal Budgets (& Why You Should Have One)
How to Make and Stick with a Personal Budget
Check Out Alternative Income Sources
There are many options for making some spare cash. You may be surprised at what you find.
Dip Into Your Emergency Fund/Nest Egg
If you don’t have one, that’s okay too. Focus on getting your personal finances together first.
But if you do have a big of money in savings, this might be the time to use some of it.
Borrow From a Relative or Friend
This can be risky on a personal level. However, if you’re in a serious situation and you need the money but don’t qualify for a loan, this might work.
Tip: Draw up a written contract with your friend or family member before transferring over the money. Write out the terms of the loan, including the initial amount and expected repayment plan.
Downsize or Sell
Depending on your situation, you may be able to sell certain assets. Consider having a garage sale or selling some antiques online. Many ecommerce stores take a small cut of your profits, however.
Talk with Your Financial Institution
Sometimes your bank or credit union can help by giving you options you may not have thought about yet. Asking them for advice can lead to some interesting results.
Draw on Your 401K Early
If you have one, you can use your 401K early… but there are major tax penalties if you do this. You may be penalized a 10% early withdrawal fee if you are under the age of 59.5. Additionally, there are other taxes and fees that come with withdrawing early, so use this as a last resort.
Questions to Ask Yourself Before You Apply for a Personal Loan
Be honest with yourself when it comes to your finances.
It can hurt your overall situation if you aren’t truthful with yourself, especially if you are trying to get a personal loan with no income verification.
Ask yourself:
Can I make my payments on time?
Do I fully understand all of the terms of the loan?
How much will this loan cost me in the end, and is it worth it?
Do I know the risks (seized collateral, impact on credit score, late fees, and other penalties)?
Are my finances heading in the right direction, and will this loan help with that?
Do I absolutely need this loan?
Am I borrowing only what I need, or am I borrowing too much?
Fixed Loan Calculator Example
If you’re interested in figured out the total cost of your fixed loan with interest, check out this interest rate calculator.
Plug in the following information to get your total:
Beginning balance
Minimum monthly payment
Maximum monthly payment (can be the same as the above amount if you can’t afford to go higher just yet)
Annual percentage rate (APR)
For example:
Key Takeaways
To recap, keep in mind the following when preparing to get a personal loan with no income verification.
Have a good reason for needing the loan. Explain your situation to the lender, if need be.
Get your documents together (any alternative income, previous tax returns, bank statements, etc.).
Improve your credit score by keeping your credit card usage down and making on-time payments.
Keep in mind your debt-to-income ratio – that is, how much money you’re bringing in vs. how much you owe. Try to keep below 30%.
Read up on the terms of the personal loan, and any related risks.
And remember:
An income is just part of the puzzle. Lenders will consider your overall application when making their decision on your eligibility.
Sometimes, you may have to settle for a smaller loan than you initially wanted, or the interest rates or repayment terms will be higher.
Some lenders may even require you to set up an auto-payment plan to ensure you make the payments in time. In those cases, bear with it for the time being and build up your credit and income over time.
Ultimately, it is possible to get a personal loan with no income verification, even if it takes some wrangling.
Related Reading:
524 Credit Score: All You Need to Know to Understand and Fix It
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