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Complete Guide to Stated Income Personal Loans

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Complete Guide to Stated Income Personal Loans

If you are currently unemployed, were recently laid off, or work for yourself, your personal loan options may be limited. Most loans require proof of income, which there’s no way for you to verify. 

Don’t worry; you still have options. Some of the best bad credit loans, such as stated income personal loans, can be acquired without income verification. While they can be a lifeline on difficult days, these loans don’t come without risks. 

Here’s what you need to know before getting stated income loans.

What is a Stated Income Loan? 

A stated income loan is a personal loan for self-employed borrowers. It was originally a type of mortgage allowing borrowers to qualify for financing without providing proof of income. 

Instead of providing pay stubs or tax returns as verifications, borrowers could just state their income on the application. And yes, lenders simply had to take their word for it. 

As you can imagine, this led to a ton of misstated incomes. On average, borrowers would state their incomes as 15–20% higher than it actually was.

Stated income loans have evolved drastically since their origins. While you don’t have to provide proof of income, lenders can assess your eligibility with your bank statements or other financial documents. 

Stated Income Personal Loans vs. Traditional Loans

Stated income loans can be great for those who don’t have the right verification to apply for a traditional loan. For instance, if you’re self-employed, you won’t have to pay for the W2s or pay stubs or prove your income.

Plus, a small business may take deductions on their tax returns, which can reduce their taxable income drastically. As a result, they’re no longer eligible for bigger loans.

So, suppose you’re a self-employed ghostwriter who writes for various clients. You may earn $100K a year, but after deducting $40K, your taxable income will only be $60K.

This helps you owe less in taxes but makes it harder to qualify for loans. 

When a traditional lender finds your debt-to-income (DTI) ratio and credit score unagreeable, they’ll disqualify you for the loan, even if you’re actually able to afford it. With a stated income loan, you can prove your income with a few bank statements.

Other differences between stated income loans and traditional mortgages include:

  • Accessibility: Due to the high risk of fraud, stated income loans aren’t commonly available. 
  • Interest Rates: Stated income loans are non-QM, which is why they have higher interest for the lender. This reduces the risk for the lender in case you cannot afford repayment. Traditional loans typically have lower interest rates.
  • Down Payment: Thanks to their high-risk nature, a lender may ask you to put down a bigger down payment. Still, finding a lender with affordable down payment requirements is not impossible. 

Why Get Stated Income Personal Loans

As a self-employed borrower, you may be looking for loans without proof of income. Stated income loans allow you to prove your income in non-traditional ways. 

If you’re a small business owner wondering how to get a mortgage, you could benefit from such a loan. But keep in mind that it may cost you more than standard mortgages. Stated income loans typically demand interest rates 2% higher than traditional options

You can use a mortgage calculator to determine whether you can afford a stated income loan. 

Benefits of Stated Income Personal Loans

Stated income or self-employed loans can be a great option for anyone unable to provide proof of income. Let’s look at some benefits. 

Easy to Qualify

Stated income loans typically require less paperwork than traditional loans. This can be great for self-employed individuals, freelancers, or those with unconventional income sources who find it challenging to provide documentation like tax returns or W-2 forms.

Faster Approval Process

With fewer documents to verify, the approval process for these loans can be quicker. This can be helpful for those who need funds urgently or don’t have time for a long application process. You may even get funding within a day or two.

Less Emphasis on Credit Scores

Some stated income loans may emphasize credit scores or past credit issues less. Instead, they focus on the borrower's ability to repay based on their stated income. This can be helpful for those with imperfect credit histories.

Risks of Stated Income Personal Loans

Regarding loans and financing, there’s always a catch to seemingly perfect loan options. Let’s look at some of the risks of stated income personal loans. 

Higher Interest Rates

Due to the high-risk nature of stated income loans, lenders demand higher interest rates to reduce the risk on their end. This will lead to a significantly higher repayment amount once you’ve fully paid off the loan.

Higher Risk of Fraud

Because these loans rely on stated income without thorough verification, there's a higher risk of fraud or misrepresentation. We highly recommend hiring a financial advisor to guide you through the process.  

Lower Loan Limits

With higher loan limits, borrowers have the opportunity to misstate their income even more drastically to improve their chances of approval. Lenders tend to limit the amount that can be borrowed with stated income loans to mitigate risk.

How to Acquire a Stated Income Personal Loan

Stated income loan requirements are pretty lenient and simple. Here’s a complete guide to acquiring a stated income personal loan. 

Eligibility Criteria for Stated Income Personal Loans

The qualification requirements will depend on what type of stated income program you apply for. Here are some general requirements. 

  • An alt-doc loan allows borrowers to use non-traditional forms of income verification, including bank statements, profit and loss statements, business financials, or invoices. You must provide at least one recent bank statement for an alt-doc loan. 
  • Bank statement loans allow borrowers to verify their income through recent bank statements alone. You’ll need to provide at least 3 to 6 months of bank statements
  • If you’re self-employed, you must prove you’ve been in business for at least two years. 

How to Find the Best Lender for Stated Income Personal Loans

Finding the best lender for your stated income personal loan isn’t as simple as picking the one with the highest loan limits. In fact, high loan limits can be indicative of fraudulent lenders. Most reliable lenders in this niche aren’t willing to offer too much funding.

Instead, comparing factors such as minimal annual income required, loan terms, down payments, and interest rates are better. Here’s a comparison of the most reliable stated income personal lenders to look into. 

Application Process for Stated Income Personal Loans

Once you’ve decided on the best lender based on your financial limits and goals, it’s time to apply for your stated income personal loan. Here are the steps you’ll need to follow. 

  • Gather Required Information: Even though these loans require less documentation, you’ll need to have some basic information ready. That includes: 
  • Personal information (ID, contact information, etc.)
  • Employment details and history
  • Alternative income verification (bank statements, tax documents, etc.)
  • Financial information (details about your debts, assets, and other financial obligations.)
  • Apply for the Stated Income Loan: You can typically apply for stated income personal loans directly from the lender’s website. If you're applying at a bank or credit union, you might need to visit a branch to complete the application.
  • Read the Loan Terms: Once you’ve received the loan terms, it’s crucial to read the fine print to avoid getting scammed. You can also consult a financial advisor to do it for you – they’ll ensure that the repayment terms, interest rates, and loan amount meet your needs. 
  • Wait for Approval: Luckily, you don’t have to wait too long to get approved – most get approved within a day or two. While it’s uncommon, you should also be ready to provide credit checks. 
  • Sign the Loan Agreement: Once you’ve carefully read all terms and conditions, it’s time to sign the agreement. Make sure there are no hidden clauses or unclear terms. If any term is unclear, don’t hesitate to ask the lender. 
  • Receive the Funds: Finally, you’ll receive the funds as a lump sum or via line of credit. 

Improving Your Chances of Qualifying for a Stated Income Loan

Stated income loans aren’t hard to qualify for, but improving your chances of success never hurts, especially if this loan is your only option. Here are some insightful tips to keep in mind. 

Prove Income Stability (Non-Traditionally)

Any home loan will require you to prove income stability, even if you have seasonal income. You need to show that you have enough income or assets to cover monthly loan payments. The exact verification documents vary based on the stated income loan type.

For example, a bank statement loan may require 3 to 6 months of bank statements. Even if your income varies from month to month, this will allow the lender to assess your annual income based on how much you spend and receive. 

You may also need to prove two years of self-employment or at least a consistent work history in the same industry.

You must also provide details about your employment or business. If you're self-employed, describe your industry and work type. For instance, a freelance graphic designer would explain their client base and payment structure, while a small business owner might offer insights on their customers and employees.

Review Your Debt-to-Income Ratio

Your DTI ratio measures what portion of your income goes to paying off current debt. 

For example, if you have $2,000 in monthly debt and $6,000 in monthly income, your DTI is 33%. Most lenders often prefer a DTI of 36% or lower, but some may accept DTIs up to 55%. 

Monitor Your Credit Score

Your credit score is a key factor for lenders – it indicates how well you manage debt. A high score suggests that you can afford to pay back debts, while a low score implies a history of missed or late repayments. 

A better credit score will typically lead to more favorable loan terms, such as lower interest rates. Lenders may also examine your credit history, including your payment history, total debts, and number of credit accounts. However, most stated income loans don’t put too much emphasis on credit scores.

Managing and Repaying Stated Income Personal Loans

Once you’ve acquired and used up your stated income funding, it’s time to start planning how to repay it. Here are some tips that may help you in the long run. 

  • Create a Budget: Your loan payments should be a part of your monthly budget. This helps ensure you have enough funds set aside for repayments. In fact, it should be your top priority until you’ve completely paid it off. 
  • Set up Automatic Payments: Setting up automatic payments ensures that, in case of extra expenses, nothing is taken away from your loan payments. Fulfilling loan payments on time every month will also improve your credit score. If you’re struggling financially, contact your lender – they may offer payment extensions.
  • Consider Extra Payments: If you have extra funds, it’s wise to make additional payments to reduce the principal balance. This can reduce the total interest paid over time. Before you do so, read the loan terms to learn about any prepayment penalties.
  • Hire a Professional: We can’t stress enough the importance of hiring a financial advisor to guide you through a risky stated income loan. They’ll provide personalized advice and simplify loan repayments. 


Stated income loans can be a helpful funding opportunity for self-employed borrowers with limited options. While they are easy to qualify for and can even provide funding within two days, they have a high risk of fraud. 

To prevent getting scammed, consider hiring a financial advisor. Our experts at Truss Financial Group can guide you through the maze of terms, rates, and fees, helping you avoid costly loan fraud. 

Contact us to schedule an appointment with an advisor today.

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Complete Guide to Stated Income Personal Loans

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If you are currently unemployed, were recently laid off, or work for...