The Danger of No Income Verification Loans
Loans

The Danger of No Income Verification Loans

EPF Last Update: March 10, 2020

When a licensed companies give you a loan, they typically verify your whole financial situation like credit score, income, debt to income ratio and so on. In many states they are even required by law to perform this check. Your credit score, income, debt to income ratio, help the lender to understand whether you can pay your loan. If you don’t meet the criteria, the lender put both you and his money on a risk. In fact the problems for customers could be much more serious. Here we will discuss them.

Credit Score Check vs Income Verification – Understand the Key Difference

Your credit history gives you whole idea on your overall creditworthy. It is based mainly on factors that are affected by your correct payments to many institutions. Loans, credit cards, bills and so on. This was the main criteria that lenders used to determine your risk.

But it was …

These day lenders relay on other factors. In fact most of the lenders these days pay more attention to your income and debt to income ratio.

Why?

Because this tells them do you actually have money or not …

There are many cases when people who have high income but low credit score, because they don’t pay their bills on time?

Do you know that there are registered millionaires that have been denied for a credit card because of their low credit score? This fact should make sense.

So, to explain the things in brief:

  • You credit score tells more about how correct you are.
  • You income tells whether you have money, whether you have the ability to pay.

Note! The ability to pay and the fact that you pay on time or not are different things!

There are many people who have money but don’t pay on time …

How No Income Verification Loans Work and Why They Are Dangerous?

No income verification loans could be more dangerous even than no credit check loans!

Here we will explain why.

No credit check loans are there where lenders don’t check your credit history and give you a loan based on other criteria.

No income verification loans are these where the lender don’t check your income and give you a loan.

In most of the cases these types of loans are payday loans or other type of bad credit loans.

There is one great advantage of these types of loans. And it is obvious. People can go and get easy money.

But, there is a hidden risk! And it become when people have to go and get back these money. In case people don’t have any money, the problem could become serious. People typically get into debt cycle or declare bankruptcy.

Now, let’s go back on our example and explain what would happen, if the loan was:

  • No credit check.
  • No income verification.

If you are in a situation that you have bad credit, but you have money, then you will be able to pay the loan on time. Both no income verification and no credit check loans are expensive, but in case you have money, you will pay them.

But what would happen, if you are very correct person, but you don’t have money? You can’t pay the loan on time.

If you actually can’t pay the loan on time, because you have no money, and you can do absolutely nothing, then the problems for you could become serious.

And that is why no income verification loans are dangerous.

Today you go and get easy money. But tomorrow, you understand that you have to pay much more, and you have no options.

Then you go and get another loan to pay the old one.

Then another.

And you are in debt cycle.

But this is not the typically debt cycle that most people know.

This is a multi loan debt cycle. Multi loan debt cycle is more serious and dangerous than traditional debt cycle.

Traditional debt cycle means that you have one loan, in most of the cases payday loan, that you can’t pay on time. The lender require you to pay only its interest, that don’t lower the principal amount over the loan. This process repeat for a long period of time.

Multiple debt cycle is the same. The difference here is that you pay many loans. This should make sense.

Pro tip:

Get loan only, if you are sure that you can pay it on time!

Are There No Income Verification Lenders and Are They Legit?

Technically there are almost no lenders that don’t perform a check to your income. All lenders claim that they verify your income and if you read their contracts carefully, you will find that it is clearly written that you income has been checked and verified.

But …

In fact, there are lenders who give you a loan without checking your ability to pay it. In most of the cases lenders only ask how much you make per month, without requiring to prove that.

And most of the people actually can’t …

This is dangerous, but let’s see now, is it legit?

Yes and no.

In some states the law require lenders to check your credit score, income and so on. So, if a lender is verified and licensed he is required by law to perform this check. If they don’t do that, they are illegal.

In other states lenders are not required to perform this check. So, if they don’t do it, this don’t make them illegal.

In addition. Even if the law require that, there are lenders who skip the law.

Should I Get a No Income Verification Loan?

When we talk about no verification loans and no credit check loans typically we talk about payday loans or auto title loans.

These loans are very expensive!

But again, this is not the only danger of them. They are dangerous also because they put people in a position where they can’t pay their loan. And people end up with debt cycle or bankruptcy.

If you ask us, avoid all no credit check loans and all no income verification loans!

Get them only if you are sure that you can pay them on time.

The Advanced Strategy if You Live On a Loan!

There are many people who live on a loan.

The day that you go and get money, is great.

The day that you go and pay them is bad.

The day that you understand that you are in debt cycle and you can’t pay your loan, much more bad.

Here is the best strategy that people should use.

Treat the money that are your from these that are not your differently!

Your money are yours! Do whatever you want with them.

The money from loans, credit cards, overdrafts are NOT your! And you should treat them differently!

Mark all money that are not your and when you go and spend them think carefully.

For every buck!

This easy rule, can change totally your finances!

When Should I Get No Income Verification Loan

The easiest rule is get such a loan only, if you are sure that you can give it back on time.

Well, in live there are always unexpected situations. There are people who become with no work for a certain period of time and so on.

Be careful with these loans!

Before getting such a loan try few these options:

  • Apply for a persona loans on many places.
  • Go secured.
  • Try alternative payday loans.

And only if you have no other options get no income verification loan.

Are All Payday Loans No Income Verification?

No!

In fact most of these loans are no credit check types loans, but NOT no income verification loans.

This again prove the fact that no income verification loans are more dangerous for both you and your lender.

Even alternative payday loans, that claim that don’t perform credit check, verify your income.

What’s your credit score vs do you have money to pay are totally different questions.

Conclusion

Be careful with things that looks too good to be true. Even if they are good today, tomorrow things change.

Thanks for reading our guide. We hope you’ve learnt something today, so your finances will be better.

Elite Personal Finance

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