Credit Repair: What Is Non Verification?

What does it mean when a loan is non-verified? Learn about this line of credit.

For most people, opening up a line of credit or getting a credit card involves having to submit documentation about the amount of money they make each month or year, as well as the amount of outstanding debt that the person has. However, for someone with less than a positive credit history or who has an irregular income, it can be hard to qualify for a traditional loan or line of credit.

One term you will hear frequently when looking for loans in this situation is non verification. At first hearing, it's obvious what this term means. You get a loan without having your income levels verified officially in advance. In fact, another term for this kind of loan is No Income Verification and it is often referred to in print as an NIV. It is usually used in cases of secondary mortgages, and it allows people to obtain financing for a home purchase regardless of income history.

For someone who is self-employed, a NIV or non-verified loan may also make good sense. It is much harder for someone to document wage history when there is no official pay stub or employer to verify employment. It allows you to state your wages and the creditor accepts your statement as you state it. Employees who work on commission may also benefit from an NIV, because it means that you can state your average income without having to prove it with a recent paycheck.

Now, if you're not well versed in credit terminology and mechanics, a non-verified loan might sound like a good idea. Why give out information about yourself and your salary levels unnecessarily, as well as paying for a credit report to be pulled on your history?

Well, there is a trade-off. In nearly all cases, a loan without verification comes with higher interest rates - much higher interest rates. The average NIV loan has an interest rate up to four percentage points higher than a loan that requires full documentation of information. (However, some institutions are beginning to offer NIV programs with better interest rates to consumers with impeccable credit ratings.) You may also be required to make a higher down payment in order to qualify for the loan if your credit isn't perfect. Most programs come with a requirement of a minimum of 20-25% down payment with the lowest scores requiring 30-40%.

NIV loans have their good points and bad points. In addition to the drawbacks stated above, you face the risk of overstating your income. If your income is truly irregular, you want to make sure that you are able to afford to make your loan payments. You will absolutely not want to overstate your earnings to qualify for a loan you can't afford. However, an NIV loan may be a good choice if your situation in not being able to qualify for a full documentation loan is temporary - because you can take the NIV and then convert to a different type of loan at a later date.

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