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Sunday, September 4, 2016

What Documents Do I Need to Apply for a Loan?

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Whether you’re considering consolidating credit card debt, paying for home repairs, or getting past an unexpected emergency, applying for a personal loan may be your best financial move.
However, applying for a loan can take longer than you think. That’s why coming in with all the necessary documents for loan applications can save you and your lender both time and effort, ultimately getting your loan approved much more quickly.
If you’re unsure where to begin on your personal loan paperwork, here is a list of seven common documents your lender may request, as well as how to find them.

What do you need to apply for a loan?

1. Credit score and history

Most lenders will pull both your credit score and history for you.
However, it’s always a good idea to do your own credit check to make sure everything on your credit history is correct before you begin your loan paperwork.
A good credit score signals to the lender that you’re able to manage your money and debts. It can also reward you with substantially lower interest payments each month!
On the other hand, a low credit score, a history of not paying your bills on time, or a limited credit history, can significantly lower your chances of being approved for a personal loan.
If you have a credit card, you may be able to check your credit score for free online through that lender’s system. Or, check out free credit monitoring sites like Credit Karma or Credit.com.
You should also sign up to get a free annual credit report throughAnnualCreditReport.com.  That way, you can see what a potential lender will see when they review your loan paperwork.
Anything that doesn’t seem correct on your credit report should be reported to all three of the credit bureaus as soon as possible so you can continue to apply for your personal loan.

2. Valid identification

While some documents for loan applications are trickier to get, others are right in your back pocket.
If you have a valid driver’s license or state-issued identification card, then you have valid identification. Most lenders want to see an ID that is recent in issue, lists your current address and has a clear picture of you.
And if you don’t have a valid photo ID, you can bring a birth certificate, social security card, or proof of citizenship along with proof of your current address, like a utility bill in your name.
You can also apply for an ID card at your state or county’s DMV if you don’t have a valid ID before approaching a lender for a loan.

3. Social security number

Although you don’t need to bring your social security card, you’ll just need to know your eleven digit number.
This is the first question you’ll fill out on your loan paperwork. Your lenders will be able to pull the right credit and background information on you with your social security number.
Not having your social security number or submitting the wrong number will delay the loan application process altogether.
So if you’ve misplaced it, forgotten it, or can’t find it, apply for a duplication social security card and number ASAP to expedite the loan application process.

4. Employment and income verification

After filling out your personal information, you’ll be required to fill in your income and employer information on your loan paperwork.
Most banks, especially those giving out unsecured lines of personal loans, require employment and income verification in the form of contact information and pay stubs.
Pay stubs, or pay records, show how much you have made, the taxes that were taken out, and the hours you have worked during that pay period. If you receive a paper check each payday, it may be attached to your physical paycheck.
Or, if you receive your paychecks via direct deposit, you may need to go online to find your paystub. Many companies have now set up online portals or websites where you sign in to print or download your copy.
If you’re still unsure about how to get income verification, contact your Human Resources representative. They may be able to get you a copy quickly, or verify your employment with the lender.
And if you’re self-employed or own your own business, bring along your 1099 statements, proof of contracts from long-term clients, or signed balance sheets from your accountant for income verification.
Your lender may require additional employment or income information as well. Be sure to ask exactly what they’ll need before applying for a loan.

5. Recent tax documents

Not all personal loan paperwork will require you to show your recent tax documents. However, it’s still a good, proactive measure to bring them along with. Tax documents from that last two to three years should be sufficient.
Have on hand your W-2 forms from your past and current employers, or 1099 profit and loss statements if you’re self-employed or own your own business. Bring along your complete federal tax returns as well.
If you need additional copies of your W-2s, contact your employers if it’s been a year or less with your social security number.
And if it’s been more than a year or the company is no longer in business, you can also request a copy from the Internal Revenue Service (IRS) for a fee using form 4506.
Both processes for requesting W-2s can take up to 75 days, so be sure to ask as soon as possible.
You can also get copies of previous tax returns from your accountant or online filing system like Turbotax for free, or for a small fee.
And if you are still not able to get copies, the IRS can help. You can fill out a request form online (or via mail) to receive your federal return transcripts from a selected year.

6. Bank account and asset information

You may need to have your bank account information handy when you are filling out your loan paperwork. Your checkbook can help you fill in the blanks for your routing and checking number.
You should also be aware of the balances in each of your accounts, such as savings, retirement, or investment accounts. These financial assets may help you look more attractive to a lender who wants to see that you have the means to pay your debts.
Most lenders will ask for an accurate ballpark estimate of money in your accounts, and the name of your bank. However, having a copy of your most recent bank statements to show the lender can only help your chances of getting loan approval.

7. Payment obligations

On the flip side of your assets are your financial obligations. These may include how much of your income goes towards your mortgage each month. Or, how much you pay for child or spousal support.
Lenders may also ask in their loan paperwork about secured debt, such as auto loans or student loans. They’re interested in getting a holistic view of your budget each month.
Like assets, you may not be required to bring in actual proof. But, it’s good to have them on hand just in case, so you can be as accurate as possible. Even a print out of a monthly statement can save you some time when you’re filling out your information.

Prepare the right documents for loan paperwork

Whatever the reason you need a personal loan, you’ll want to be prepared for the lengthy loan paperwork.
By having essential documents such as your photo ID, previous tax forms, and contact information for your employers or banks, you can expedite the process and get money in your hand much more quickly.


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