Tower Loan Blog

Personal Loan Documents Checklist

There are lots of steps involved in loan applications, but one of the most important is getting all of your documents ready for the lender’s approval. These loan documents prove who you are, back up your financial information, and give lenders the information they need to make an informed decision.

Every lender will have a unique application system and tailored eligibility requirements. However, loan required documents remain largely similar. So let’s dive in: what are the documents required for loan applications?

What Documents Do You Need for a Personal Loan?

Understanding the documents needed for personal loan applications will increase your chances of approval and speed up the process. Get organized before you apply, and make sure you have all the loan required documents needed by your lender. Well-structured applications demonstrate financial literacy, preparedness, and reliability.

So, what loan documents should you prepare to provide?

Photo Identification

This is the most basic item on the list, and lenders will always require photo identification. Due to concerns regarding identity theft, lenders may even require two pieces of photo ID.

The photo document required for personal loan applications must prove that you’re a citizen of the United States or a permanent resident. Lenders also need to know that the applicant is at least 18 years of age, or the minimum age to consent in each specific state.

Some examples of acceptable photo identification include:

  • Driver’s license
  • Birth certificate
  • Social Security card
  • Passport
  • State-issued identification card
  • Certificate of citizenship

Almost all lenders will accept copies of your ID. Making multiple copies is best to ensure your loan application runs smoothly. In the meantime, make sure you keep the originals in a safe and secure location.

Loan Application

Surprisingly, many people forget that one of the loan required documents is the loan application itself. Never assume the individual assessing your application has a copy of it in front of them.

As part of your personal loan documents, make sure you have a filled-out copy of the lender’s application form.

Loan applications differ from lender to lender. All of them will ask for basic information, such as your name, date of birth, and Social Security number. However, others may ask for more detailed information, such as your annual gross income.

Proof of Income

Proof of income for loan applications is essential because you need to prove that you can make the monthly repayments to the lender. Everyone needs this document regardless of whether they are taking out an unsecured personal loan or a secured home loan.

Providing proof of income enables lenders to assess their risk and determine whether someone is a suitable candidate for a loan. The ideal borrower is in stable employment and will have a guaranteed paycheck coming in for the foreseeable future.

Traditionally employed applicants can provide proof for personal loan documents required using the following:

  • Your most recent pay stub
  • Last year’s tax return
  • Form W-2
  • Form 1099
  • Bank statement dated within the last 30-90 days
  • Employer’s contact information

Your proof of income also serves as proof of employment. Some lenders may call your place of work to confirm that you work there and how long you’ve been an employee.

But what is needed for personal loans if you happen to be self-employed? Most lenders accept the following loan documents:

  • Recent bank statement
  • Form 1099
  • Your latest tax return

You may need to get in touch with your CPA or a tax professional to help you provide the necessary documentation. However, the process is essentially the same, but some lenders may want to scrutinize the numbers more if you’re self-employed.

Proof of Address

Many people wonder why proof of address is so important for lenders. Obviously, they need to know where to send the bill and that you’re living at the address you put on your application.

However, there’s also another little-known reason. Your address helps lenders determine your lifestyle and how stable it is.

Some lenders may ask for two documents to prove your address. Nearly all lenders accept the following. Documents should be dated within the last 30-90 days.

  • Utility bill
  • Rental contract
  • Proof of home insurance
  • Receipt for your last property tax bill
  • Bank statement
  • Voter registration card

Cell phone bills are generally not acceptable, as they’re considered less secure. Be prepared to provide the originals if your lender doesn’t accept copies.

What Information Will Lenders Need from You?

Now you know what documents needed for personal loan applications, you should also be prepared to speak to your lender directly. Although some lenders can decide based on your papers alone, most financial firms want to make additional inquiries.

Let’s examine the three most common questions and why a lender might ask them.

Why do you need to borrow the money?

Personal loans are the most flexible loans, but that doesn’t mean lenders aren’t interested in why you want the loan. It could be for loan consolidation purposes or covering an emergency car repair.

Lenders can also use your answer to recommend the best loan product to suit you. Many lenders offer specialized loans for specific purposes, and they may come with better rates than a general personal loan.

How much can you afford to borrow, and for how long?

Before taking out any personal loan, you should have already figured out how it fits into your household budget. Every penny borrowed must be paid back plus interest. Longer loans mean smaller monthly repayments, but you also have to factor in that you’ll be paying it off for longer.

Lenders aren’t looking to squeeze you. They’re making sure you can comfortably pay off your loan without too much trouble. Credit scores, income, and debt-to-income ratio are just some of the metrics lenders consider when assessing your suitability for a personal loan.

What’s your credit score?

Your credit score is the most important three-digit number in any loan application. It’s a representation of your borrowing history and an indicator of whether you’ve been able to handle debt in the past.

It’s worth opting for prequalification, if available, to let you know whether you qualify for a loan using a soft check. Hard checks negatively impact your credit score, so it’s best to opt for the soft credit pull. Strategically judging which loans to apply for from which lenders can limit the number of hard pulls that show up on your record.

A low credit score doesn’t automatically disqualify you from a loan, but it will likely mean paying a higher interest rate. Some lenders specialize in serving people with no score or poor credit histories, so it’s worth shopping around to see what’s available.

If you’re struggling to get the personal loan you need, there are additional options. For example, you may be able to get a friend or family member to cosign your loan. Alternatively, opting for a secured personal loan reduces lender risk and increases your chances of getting approved.

Work with the Experts at Tower Loan

Getting together all the necessary loan documents decreases the time it takes to receive a decision on your application. Understanding your current financial situation also enables you to only apply for loans you’re likely to get approved for.

With over 80 years of experience, Tower Loan can advise you on how to proceed on loans for all your needs. If you need a personal loan at a competitive interest rate, we can help you get the financing you  need.

We’re here for you when you need it the most. To make applying for personal loans simple, quick and convenient, get in touch with Tower Loan today.