Stated Income Loans – What Are They?

If you are in the market for a loan product, you might make some use of the state income loans.  This is typically a loan instrument wherein the debtor will “state” their income on the information sheet during the application process.  Lenders and creditors will take the listed amounts at their word.  Lending institutions will not bother to check and verify any of the information listed on the income portion.  Incidentally, this has lead the stated income loansbe referred to as “liar loans”, because of the tendency of the applicant to overestimate their income on the application.

The reason behind the inflated stated amounts is because of the desire of the applicant to have the loan products to be approved immediately.  Qualification for the loan products is just about the goal and intention of the borrowers.  There are certain reasons why people will take out this type of debt instrument.  One of which is that they cannot properly provide the documents needed as proof of their income.  It may be because they are seasonal workers that are unable to pay for the debts or perhaps they may be employees who are paid in cash and will have no records for their income and salaries.  Current mortgage rates may also be elements that will lead to borrowing.

If you are lender who happens to offer the loans, it will be a huge risk on your part.  There is that possibility that the potential borrower will not have the capacity to pay off the loans when it becomes due.  For this reason alone, the creditors will often charge huge amounts of interest to the loan product being offered.  In addition to the rates, it will ask a higher down payment, plus a shorter term for the debts.  Hence, this will result to higher monthly payments for the borrower to pay.

Furthermore, it has been studied that regardless of the income, borrowers that have good credit scores are still more likely to pay for the loans.  Hence, it has been stated that people with a minimum credit and FICO score that will substantiate their applications.  When complying for the requirements of the loan, it is important that you ask for the list to ensure that you comply with them the soonest possible.  Stated income loans may have higher interest rates, but they are certainly faster to process than traditional loans.