The Advantages of Stated Income Loans
In today’s society, many people think that getting a loan on a handshake deal is a relic of the covered wagon days where a person could walk into the general store and come out with goods that were placed on a tab. However, these types of loans still exist, even though they are called a different name. Stated income loans essentially allow a borrower to get a general store experience in a post-industrial society. There are several advantages to this type of loan for the lender and the borrower.
First of all, the best advantage of stated income loans is that they are easy, less stressful and less time consuming than a traditional loan. The ease of them means that the income a borrower claims to earn is taken at face value by the lender. Lenders who offer these loan options typically don’t require pay stubs to verify proof of income. They merely decide if they want to approve or reject the loan request. This streamlines the loan application process, saving both parties valuable time.
Second, loans that are based on a statement of income are advantageous to those who don’t have a steady stream of revenue from one pay period to the next. For instance, those who take on freelance or contracted projects often have flush periods followed by lean times. Applying for this type of loan allows the borrower to apply for a loan even when their current income stream does not reflect eligibility.
Finally, these types of loans allow the consumer greater flexibility. With traditional loans there are often restrictions on the usage of the loan amount or payment penalties. With a modern lending option such as that of income statement, the borrower makes the decision as to whether the payment that the lending institution offers is affordable and agrees to pay it back at the appointed time with any accrued interest. Lenders are also able to offer more flexible interest rates and terms to help defray the risk of default on the loan.
Stated income loans have many practical advantages, especially in a dynamic global economy. They give greater power and flexibility to borrower. For the lender, it offers a greater chance of profit. For both parties, the process is far more convenient and allows them to spend time on other tasks. Distributed properly, loans based on stated income can be an ideal partnership for lenders and borrowers, bringing an old business model a new perspective.