Key Takeaways
- Proof of employment shows you have a job and have income to support a new loan
- Title loan lenders don’t require proof of employment but must verify income for loan approval
- You can prove employment with an employment verification letter from your employer
- You may also use pay stubs, bank statements, and W-2s for employment verification
Proof of employment is a key component of loan approval with most lenders. Even if you can prove you have enough money to make the loan payments, lenders need to hear that you are employed and will be for the foreseeable future.
You can prove employment in many ways, many of which coincide with income verification documents. For example, pay stubs and W-2s are great ways to prove employment and income. If you’ve lost your documentation, you may be able to ask your employer to prove employment for you.
What is Proof of Employment?
Proof of employment shows lenders that you are employed and earn income. It could be one of many documents your employer provides to verify employment. The document is usually on company letterhead or contains their logo and is a physical or digital copy.
Why do Lenders Need Employment Verification?
Lenders require employment verification to ensure you can afford the loan you’ve applied for. Employment verification reassures lenders you have the job title you said you did and earn the income you stated on your application.
There are some exceptions to the rule, such as title loans. Most title loan lenders prioritize proof of income and vehicle equity. However, the income doesn’t have to come from employment. A title loan relies on your vehicle’s equity and your ability to repay the loan. Lenders use your vehicle as collateral, allowing applicants to borrow up to 70% of the vehicle’s value. If you don’t repay it, they can repossess the car.
Who Requires Proof of Employment?
Most lenders require proof of employment. This is how they determine if your budget allows room for the new loan payment. This includes mortgage companies, auto loan lenders, credit card issuers, landlords, and potential employers.
As mentioned earlier, title loan lenders have slightly different rules. Their primary requirement is proof of income, but it can come from many sources, including:
- A current job
- Unemployment
- Social Security
- Pension or retirement funds
- Worker’s compensation
You may be a good candidate for the title loan if you have income verification. In addition to requiring your income information, the second primary requirement is proof of vehicle equity. Your car is the collateral for the loan, but title loan lenders rely on your income verification to ensure you can afford to repay it. Because title loan lenders don’t use credit scores to qualify you for a loan, they must know beyond a reasonable doubt that you earn enough income to cover the loan and your existing financial obligations.
5 Ways to Prove Employment
There are many ways to prove employment and income information, including the following:
- Employment verification letter: Employers or HR departments provide letters that state the employee’s name and address, your title, employment dates, and income.
- Pay stubs: Recent pay stubs prove you are currently employed and show lenders how much you earn per pay period. A pay stub also shows lenders your year-to-date income.
- W-2: Your employer must send you a W-2 at the end of each tax year. The form shows how much income you earned for the year, the amount of taxes paid, and any benefits provided.
- Contracts or signed agreements: Some employers supply an offer letter or require a signed employment agreement when you start a new job. It often includes your hire date and income.
- Bank statements: Some lenders, like title loan lenders, accept bank statements as proof of income. The key is to have regular deposits for the income you stated for it to be sufficient.
How to Prove You Are Self-Employed
If you work for yourself, you won’t have pay stubs or a W-2, but there are other ways you can prove employment:
- 1099: A 1099 is the equivalent of a W-2 for the self-employed. It shows the total income earned from the company you did business with for that year.
- Company financial statements: If you own a company, you can use your balance sheets and Profit & Loss statements to prove your income.
- Tax returns: Your tax returns show the income you claimed for the year while self-employed. They can help prove your income from the previous year.
- Letter from CPA: If you have a CPA who handles your accounting, they can write a letter on their letterhead confirming your self-employment.
- Invoices: If you run a freelance business, invoices can help lenders determine your average income, and bank statements can prove receipt.
What if You Cannot Prove Employment?
If you are not employed but have income, you can look for alternative loans that don’t require traditional employment. For example, banks, credit card issuers, and mortgage lenders typically require you to be employed full-time and have a stable income.
But if you are unemployed, retired, or on sick leave and have a financial emergency, you may wonder how you’ll get an emergency loan. Alternative loans, like title loans, may help in situations like this, providing funds quickly without needing employment records.
Alternatives to Proof of Employment for Title Loans
Title loans offer flexibility when you need emergency funds. While a traditional employment verification letter is always welcome, most title loan lenders also accept the following:
- Unemployment letter
- Pension statement
- Social Security statement
- Trust Fund statement
- Annuity statement
- Proof of court settlement
- 401K or IRA statements
- Investment statements
FAQ
How do I Get Proof of Employment from my Employer?
Large companies usually have a Human Resources Department that handles proof of employment. If your company doesn’t have an HR department, ask your supervisor for an employment verification letter on the company’s letterhead, with their signature and the date.
Can I Write my own Proof of Employment Letter?
Generally, your employer should write your proof of employment letter. However, if they are unable to do so, you’ll need them to sign and date the letter after verifying the information you provided.
Can a Lender Call an Employer to Verify Employment or Income?
Some lenders may verify your employment or income by calling your employer or requesting a written verification. Mortgage lenders often ask for a written employment verification letter and follow up with a phone call to be sure.
What Happens if an Employer Doesn’t Provide Proof of Employment?
If your employer does not verify employment, you may need to resort to alternative verification forms, such as bank statements, pay stubs, or W-2s. Provide the lender with as many sources of income and employment as you can to prove employment.
What is Proof of Income?
Proof of income and employment are often interchangeable, but income verification refers to documents supporting your income, such as pay stubs, W-2s, or tax returns. Your employer can also provide a letter to serve as an income verification document.
Are Checks Proof of Income?
Most lenders accept pay stubs from your paycheck as proof of income. The more recent your pay stubs are, the more likely a lender is to accept them. They usually require pay stubs from the previous 30 days to prove your income from the most recent pay period.
Do Paystubs Verify Employment?
Pay stubs show lenders you are currently earning an income. However, most lenders follow up with a phone call to the employer to ensure you are employed.
Final Thoughts
Most lenders won’t approve your loan without proof of employment and/or income. Title loans are an exception to the rule because title loan lenders have more flexible guidelines, focusing on your income and vehicle value over anything else.
If you need emergency funds and don’t have traditional employment, a title loan can help you get the funds you need. The online application process takes only a few minutes, and you get a free quote with no obligation.
Written by
Samantha Hawrylack
Samantha Hawrylack writes for our company and is an expert in personal finance. Sam received her Bachelors of Science in Finance and her Masters in Business Administration from West Chester University of Pennsylvania. She began her career in the financial services industry and shifted to an entrepreneurial role where she could directly impact clients. Sam has an impressive background in personal finance and business management.