The term installment loan indicates that a consumer loan is repaid in monthly installments. Since the bank has to find out about the borrower’s creditworthiness, in most cases it requests proof of income.
It is striking that lenders are increasingly refraining from providing evidence of their applicants’ income and trusting the information provided in the loan agreement. This procedure makes work easier and enables fast loan payments.
Reasons for not submitting proof of income
If banks give an installment loan without proof of income, they can process the loan application more quickly because the verification of submitted pay slips is no longer necessary. Especially when applying for a loan on the Internet and sending the requested documents as a file, there is also the possibility of easy falsification of documents.
This can be made more difficult by the additional request for account statements, which, however, significantly increases the processing effort for a loan application. Particularly in the case of instant loans, the payment of which banks promise to pay within two bank working days after the application, it is common to refrain from submitting proof of income.
Traditionally, mail order companies approve installment payments as a special form of installment loan without proof of income. This does not always apply if you do not process the installment payment directly with the purchaser, but instead arrange for the latter to borrow from a bank.
Honesty is required
The fact that banks are granting an installment loan without proof of income in more and more cases for pragmatic reasons does not mean that they do not provide regular income. Regardless of the non-verification, the borrower is obliged to provide correct information in the loan application, especially since incorrect information is associated with serious consequences. As long as the borrower pays his installments on a regular basis, deliberately incorrect information is not noticed in the loan application.
However, in the event of irregularities in the loan repayment, the bank listens carefully and subsequently checks the information in the loan application. If she deliberately discovers false claims, she can terminate the loan and request immediate repayment even if the borrower is less than two installments behind. Furthermore, lenders often file a criminal complaint for fraud if they discover false information in the loan application.
In the case of first offenders, the courts take into account that the bank has facilitated fraud by not submitting proof of income and impose a suspended sentence, which is, however, considered a criminal record. Another difficulty with incorrect information in the loan application is that it is the reason for the refusal to discharge the remaining debt after a personal bankruptcy.
It is okay, however, that the borrower gives an installment loan without proof of income in addition to his main income, all secondary income, even if most banks do not take this into account in their household accounts.