Paystubs are among the essential documents you need to prepare when you have to apply for a loan. If you require a car loan, student financing, or personal funds, banks will ask for your paycheck stubs. Loans like mortgages also require payment records for several months to ascertain you are solvent and able to make timely payments every month.
We have collected salient tips on preparing your paystubs for a loan application. They will expedite the process and prevent you from falling into usual pit holes along the way. Nothing is worse than a delayed or denied loan application when you urgently need the money!
Are Paystubs Mandatory to Apply for a Loan?
No, they are not the only way to show proof of your income for a loan request. You can also use your bank statement or W-2 forms to verify how much you earn. If you have a high credit score, you may get approved for a loan directly after answering a few questions. The bank may choose not to ask you for any proof. Still, paystubs remain a popular method of proving your financial worth and ascertaining that you earn enough to repay the capital with interest. The absence of regular, dependable income can weaken your case. Some lenders also get skeptical if your income comes from multiple sources and is not consistent over time.
How to Prepare Paystubs for a Loan Application
Let us dive right in. These tips apply across the board: part-time employees, self-employed workers, business owners, you name them.
- Ensure your paystub reflects all the necessary information
Your paystub is admissible when it includes all the required information: your complete name, employer’s details, gross earnings, deductions, and Social Security Number (SSN). Your loan provider will demand a thorough picture of your income to ensure you can repay the entire amount.
Prepare paystubs dating back at least three months
Most banks will ask you to share checkstubs for at least a few months. It is imperative to receive a more accurate view of your income history. Regular paystubs will show how much you make monthly and if you get paid consistently. Checkstubs for three to four months should be adequate, although you may occasionally have to arrange for more. The latter is probable when you apply for a big loan like a mortgage or a refinance. Everyone wants to be entirely sure.
Create paystubs even if you are self-employed
Freelancers, contractors, and other self-employed professionals do not receive paystubs from employers. If you fall in one of these categories, you can turn to an online paystub generator like StubCheck.com. You can get detailed, professional records within minutes of entering the required information (contact details, earnings, etc.). The background calculator performs all the requisite computations as per updated tax norms and policies in your state.
It is crucial to pick a reliable provider while generating a paystub online. Records that do not look professionally made or lack essential details will likely get rejected. Paper paystubs are not a requisite for loan applications. Digitally generated paystubs can work as long as they are professional, have all the company details, and reflect your gross income. It is best to come with original documents. Photocopies are likely to get rejected by many lenders.
Avoid the temptation to fake a paystub
Fraud is perpetually on the rise. A 2022 study titled the ‘Snappt State of Apartment Tenant Screening Survey’ suggested that 12.5% of rent applications come with fraudulent documentation. Paystubs frequently get fudged, as are bank statements and identity papers. It can be enticing to fake a checkstub to bloat your income and strengthen your loan application. Some frequent lies include exaggerated income, false employment, and inaccurately represented debt.
However, if you get caught, the penalty can be severe. Not only is your application certain to be dismissed, but you may also be looking at prison time. Your credit score will suffer substantially, preventing you from being eligible for loans in the future. Some lenders may demand that you repay the capital immediately, landing you in a difficult situation.
If your funds seem inadequate, it is better to arrange to bolster income like property papers, a letter from a guarantor, etc. You can also choose a personal installment loan or a specialized loan for students, members of the military, etc. The latter often comes with attractive benefits and easy repayment.
Adapt your paystub to show any additional details that may be required
Some banks, financial institutions, money lenders, etc., may require extra fields in a paystub. For instance, you may have to include your marital status. If you work for multiple clients, you must show your income from all the sources to create an accurate concept of your financial situation. In such cases, using an enhanced paystub template can be helpful. StubCheck.com has a handy tool for personalized paystubs that will cost you $4.99 apiece. You can also use a free paystub maker if it matches your needs as long as it is above-board and comes with trusted reviews.
Arrange for supporting documents to strengthen your application
Many professionals frequently use paystubs as income proof for loan applications. They are highly likely to be admissible and adequate to prove your income. However, some banks may have a policy against accepting only checkstubs in light of the rising cases of fake financial papers. We suggest preparing a thick docket of various income-related papers as supporting evidence. Complementary documents like a letter from your employer, W-2 forms, property documents, etc., can improve the likelihood of your loan getting approved faster. You should also carry your bank statement.
Your paystub can prove vital when attempting to get a loan for a new vehicle, a property investment, or tuition for further studies. It makes perfect sense to start reading and storing these financial records in every pay cycle – if you don’t do so already!