The financial needs do not take current income into account. It often happens, for example, that young professionals, the self-employed or the unemployed need a loan for larger purchases or urgent repairs. Due to their economic situation, these groups of people often need a loan without proof of income. Even if these people have regular income, they do not come from a contractual employment relationship and cannot be proven and are also not guaranteed for the future.
Proof of income as security for the lender
Banks as lenders require collateral from the applicant to agree to a loan application. A credit request today is primarily based on the applicant’s proven monthly income. Usually, the last two to three proofs of salary are presented when the application is made when a loan request is made to the bank. The lender uses these numbers to estimate how high the monthly charge for repaying the loan may be. The possible monthly charge and the maximum term provide the framework for the maximum amount of the loan.
Income from self-employment is not predictable and therefore cannot be proven. The situation is similar with, for example, financial contributions from relatives. For this reason, these forms of income, even if they can occur, are not taken into account in the bank’s risk assessment. A bank usually only grants a loan without proof of income if collateral in another form is available. In addition to guarantees, this also includes property or insurance.
Personal to personal loans as an alternative to regular bank loans
In addition to banks and other institutions, private individuals are also looking for a lucrative investment. They offer loans to other individuals. On the Internet there are providers that bring lenders and borrowers together among private individuals. Since the conditions for the loans are freely negotiable between the borrower and the lender, a loan without proof of income can also be granted here. The loan terms on the private capital market are often cheaper than a traditional bank loan.