There are many variables that lenders look at when giving out personal loans, such as a potential borrower’s income. If a person is thinking about obtaining a personal loan, and they have a non-traditional source of income, they may have a lot of questions. They may be wondering about the other qualifying factors that lenders look at when determining loan value and eligibility.
Here is more information about qualification for personal loans and the crucial role of income.
What Factors—Along with Income—Are Personal Loan Based On?
A personal loan’s value and eligibility will be determined by the following factors:
An Individual’s Income
Lenders, for almost any loan, will look at a potential borrower’s income. This will show them whether a lender will be able to make the required monthly payments on time, and in full. Income will also give lenders an idea of what loan value an individual can afford to pay back.
An Individual’s credit
Checking a credit score can give a lender a good idea of how their potential borrower will handle repayment. A credit score is a numerical reflection of an individual’s financial habits and is used by most lenders when determining eligibility for a loan.
As a borrower, it may be helpful to check your own credit score and credit reports before seeing a lender. Doing so can keep expectations realistic, and more importantly, help spot any mistakes that need to be corrected before getting in touch with a lender.
The Amount of Debt an Individual Has
Some lenders may ask their potential borrowers about the amount of debt they currently have, and what the monthly payments for those debts look like. This can help them gauge exactly how much income an individual really has.
- An Individual’s Employment Status
Not all lenders will look at this, but a majority will ask about a potential borrower’s employment status. Whether it is traditional, contract, or self, proof of income through the form of documentation will be required.
An Individual’s Ability to Pay Back the Loan
The lender will weigh in all the aforementioned factors to try and figure out the borrower’s ability to repay the loan.
So instead of income being the largest or most important factor, the ability to repay a loan is actually the most significant factor when it comes to eligibility and loan value.
Is There a Required Minimum of Income for Personal Loans?
There may be some who are wondering if there is a required minimum income for personal loans. Every personal loan lender is different and loan terms can range quite a bit. For this reason, there really is no minimum value of income that is expected. It is up to the lender to decide what they want to keep as a minimum requirement.
This is one reason why it is extremely important to compare several lenders when looking for any kind of loan, including personal loans. Loan financial referral services such as MaxCash can do this research work for their borrowers.
Instead of being a single direct lender, referral services work with several kinds of lenders to help their customers connect with funding. For those who are unsure about certain factors like income, a loan financial referral service can be a good place to start.
What Kinds of Income Do Personal Loan Lenders Accept?
Although all lenders are different, in the lending industry there are forms of income that most financial institutions will accept, while other forms are not widely accepted. Here is a breakdown of those:
Forms of Income that Are Widely Accepted:
- Wages from a job
- Self-employment income
- Income from dividends and interest
- Financial gifts as income
- Social Security benefits
- Non-taxable income
- Rental or property income
Forms of Income that Are Not Widely Accepted
- Fringe benefits
- Income of household (unless a spouse)
Are Personal Loans Easy to Get Compared to Other Loans?
Personal loans are unique in that they can be offered as either secured or unsecured, and so they are more widely available for a range of finances. When compared to other kinds of lending, personal loans are easier to obtain due to varying qualification factors.
Because personal loans have been around for so long, there are tons of lenders out there. This availability is another factor that increases chances of being approved for this kind of lending.
If a person is thinking about applying for a personal loan, they may be curious about how much of a role income plays in the process. Income will be a crucial determining factor when it comes to the value of the loan and eligibility, but there are other factors that are just as significant, if not more.
Although personal loans are based on income, they are also based on several other important factors. Before a potential borrower decides to apply for a personal loan, it may be helpful to know those factors and what kinds of income most lenders will accept. Having this knowledge will make the loan process easier and smoother, for both the lender and the borrower.