Keep all your important pieces of paperwork safe and findable. Applying for a bank loan is an arduous process primarily because of most lenders’ requirements. Most requirements involve presenting paperwork to prove something to the bank, making you worthy of the loan.
Whether looking for a personal or a business loan, these requirements are pretty standard and are often easy to procure and submit. Failure to provide the documents will ensure that you do not qualify for the loan, so it is best to promptly find and hand them over.
The critical pieces of paperwork you will need when seeking a loan will include:
Proof of Identity Documents
First and foremost, you will have to prove your identity to the bank before they can even consider you for a loan. There are various elements that your identity documents prove, such as your age, nationality, and citizenship.
Documents the bank can ask you for as proof of identity may include your:
- National or State Issued ID
- Driver’s License
- Military ID
- Social security card
- Birth certificate
- Certificate of Citizenship
The bank will probably only ask you for copies of the above documents, but it is always a good idea to have the originals ready.
Your W2 Form to Prove Your Income
You will also need to prove to the bank that you can pay back the loan, and the best way to do that is to have proof of earning an income. Consistently earning an income ensures that you can make deductions towards the loan payment, even indirectly from you.
Tax documents are the best documents for proving an income. The best part about it is that you can quickly get an online W2 form. Three years of your past income returns should be enough to convince the lender of your ability to pay back the loan. However, you should provide as many forms as the lender asks for during the loan process.
Financial and Bank Statements
If you are with another bank, a lender will ask you for your bank statements to determine your financial capacity. You will be asked for such documents when applying for a commercial loan for your business.
The bank will need your balance sheet, cash flow statement, and profit and loss statement. The statements will likely have to go back at least three years though the statements should be up to date. Other lenders will also ask for your financial information, including three months of your business’s financial statements.
Your financial statements will also be vital for determining your creditworthiness for a personal loan. The bank may also ask for your personal statements if your business is small or has only operated for a short while. You may also require a personal guarantee to get the loan in such cases.
Loan Documents or Lease Agreements
If you have any open loans or leases, the bank will require you to submit the loan documents and lease agreements. It is especially so for a business loan.
The bank wants to know if you have any commitments that might prevent you from paying the loan. It is good to have lease or mortgage agreements in hand if the bank asks you for them.
Proof of Address
A lender may ask you for proof of address if the above documents aren’t enough or if you are using your house as collateral. If so, you will need to prove that you own the property. You can typically use a utility bill, mortgage or lease agreement, property tax receipt, or home insurance documents for proof of address.
These are some documents that a lender will ask you for before giving you a loan. The bank will then know your personal and financial information. These documents should be ready by the time you visit a lender to ask for the loan, and if so, you’ll be safe.