Alternative documentation is used by lenders to verify loan applicant information, such as employment and income. Common forms include pay stubs, tax documents, and bank statements. Providing alternative documentation can speed up the loan approval process.
Alternative documentation is a term used to describe any document accepted by a lender in order to establish specific facts about a loan applicant. Documents of this type are often intended to provide evidence of employment, as well as evidence of a steady stream of wages, salaries, or income. The idea behind alternative documentation is to provide lenders with reliable documents that affirm the information contained in the loan application. This can then help speed up the processing of that application.
There are several commonly accepted forms of alternative documentation. One of the most common is the pay stub. Submitting a stub for the most recently processed payroll period allows the lender to quickly see how much net income the loan applicant receives each pay period and compare it to the loan application information for annual income. In some countries, tax documents will also be acceptable such as this type of supporting documentation, as well as copies of bank statements.
Most lenders will request some alternative type of documentation at the time of application submission or at some point during application processing. The range of documents that may be required will vary, although most will have to do with determining the applicant’s identity, the amount of revenue generated by that applicant on a consistent basis, and the applicant’s permanent address. From this perspective, these additional documents help the lender avoid certain risks inherent in lending money and also help enable the lender to make a more informed decision when evaluating the application.
Lenders who give short-term loans also often require some form of alternative documentation. For example, a payday loan firm may accept a paycheck as proof of income and will likely request a copy of a recent utility bill or bank statement to confirm the physical address of the loan applicant. In situations where the applicant is self-employed, many of these types of short-term loan lenders accept alternative documents such as tax returns, income and expense statements, and bank statements as a means of confirming identity.
The advantage of providing alternative documentation is that lenders are able to proceed with relative confidence that the applicant has provided accurate and complete loan application information. This in turn helps minimize the time it takes to process the application and approve or decline the loan. From this point of view, the alternative documentation allows the applicant to receive an answer sooner or later and to move forward with the next step to obtain the financial assistance that he wants.
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