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The Importance of Employment Verification for Lenders

The Importance of Employment Verification for Lenders

The Importance of Employment Verification for Lenders

One of the most important parts of the loan process is verifying that a borrower is gainfully employed. This is because those who are unemployed are unlikely to have sufficient financial resources to repay their debts in a timely manner.

How Do You Confirm That Someone Has a Job?
The easiest way to confirm that a borrower is employed is to ask for a recent pay stub. If an applicant is self-employed, you can ask for a copy of that person’s most recent tax return to establish his or her qualifying income. If necessary, you may be able to contact the company listed on a client’s loan application to get more information about that person’s employment status.

You Want to Make Sure a Borrower Remains Gainfully Employed
It’s generally a good idea to review an applicant’s employment history before approving a loan application. This is because a person who tends to switch jobs on a regular basis may have a more unpredictable income. That said, each case is different so be sure to take into account all factors in their history and the application. In the event that a borrower is self-employed, you’ll simply want to look for consistent income each year regardless of how many clients that individual may work for.

How Much Money Does a Potential Borrower Earn Each Year?
Verifying that a person is employed can also help you establish that he or she earns enough money to qualify for a loan. If an applicant earns a small amount of income, it may be difficult to justify giving that person a very large loan. However, it may be easier to approve the same loan for someone with a substantially greater income.

As a general rule, you don’t want to lend money to someone who doesn’t have the means to pay that money back. Therefore, it’s important that you verify a borrower’s employment and income history before approving a loan application of any kind. We know that this is a very tedious process and that’s why Private Eyes can streamline the entire employment verification from start to finish.

Have questions?  Speak to an expert for more information.