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  • Income woes

    Ever hear how banks only lend to those who don't need it?

    Not quite that, maybe, but we do have this strange little policy of only lending money to those who can afford to pay the monthly payment.

    With this in mind, sometimes we ask to verify the income you claim to make when you apply for a loan. When we do, it is kinda important that the reality be... well, pretty much what you stated it as.

    Now, you say you make $2000 a month and it turns out you make $1920... we'll probably be able to work with that.

    You say you make $2000 and month and give me two bi-weekly paystubs showing $200 every other week... that is an issue.

    Money that you used to make 6 months ago before they cut your hours doesn't help you right now.

    The job you just interviewed for and hope to get doesn't help either. Give me a signed offer letter with a set salary, and we'll talk. Otherwise, you need two paystubs.

    The worse, though, the absolute worse, are the business owners.

    Okay, I really do understand. I do. You don't want to pay taxes. Thus you will claim everything from "business meals" to car repairs as expenses if your tax advisor tells you it's legal to do so (at least I hope it's legal...).

    But here's the thing. For a lender, to give you a loan, we gotta see that you can afford the monthly payment. If you give me tax returns that say you had $40,000 in sales and $41,000 in expenses... you made NOTHING. I have NO income. Zip. Zero. Nil.

    Okay, okay, there are a few items I can add back in. I can add back in depreciation because it's a taxable write-off but not necessarily actual cash spent that year. I can add back in expense wrote off for using some of your own home for the business. I can add back in interest to loans (since we're already counting the loans against you as monthly obligations). Fine. You made $3500. For the YEAR. That's still not enough to afford a loan.

    But you made $40,000 in sales!

    Yes, and you just told the IRS that it cost you $41,000 to make those sales. Guess what. You tell the IRS that's the cost for you to run your business, we have to believe you.

    But you just didn't want to pay more in taxes than you had to?

    Were those or were those not costs associated with the business? Because if they weren't, you might want to be watch out for audits. Not that it matters to me, because the point stands: what you tell the IRS, I have to believe. THAT is your income. ...and maybe that income is rather accurate, since it appears you need this loan for debt consolidation. How'd those credit cards get run up like that anyway? Maybe someone isn't making ends meet with that $40,000 in sales.... hmmm...? Maybe giving you this loan would put you into an even deeper hole than you're in already?

    We don't do start up business loans. We do loans based on you having the reasonable capability of paying our monthly payments. YOU do not meet that requirement.

    Thanks for playing.

    Denied.

  • #2
    It always amazes me the people who get a loan from the bank, then blame the bank when they can't repay that loan and the bank takes their colateral and sell it to repay the loan. You can see them on TV crying about "The bank took my house! They didn't have to do that!"

    There was one special on our TV here in Australia about a truck driver who thought it would be a good idea to give up being an employee, use his house as colateral and buy a truck and contract to his previous employer. As the story goes, the employer ran out of work, but the repayments on the truck didn't stop.

    The story ends with him sitting in a rented house, crying about how the bank took his house and how that house was his heritage for his kids.

    My main thought was "That wasn't your house the moment you signed the loan paper at the bank." The bank let you use the house and the truck as long as you kept up the repayments.

    I always think that those deals where you have to buy something to keep your job is always good for the company, but not so good for you.

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    • #3
      So, you're either broke, or a fraud.

      Hey, guess what two kinds of people banks don't like? Go on! Guess!!!!
      - They say nothing good happens at 2AM, they're right, I happen at 2AM.

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      • #4
        Quoth bankworking View Post
        How'd those credit cards get run up like that anyway? Maybe someone isn't making ends meet with that $40,000 in sales.... hmmm...?
        Sounds like someone slept through the part of Accounting 101 that explained the difference between gross revenue and net income.
        "Crazy may always be open for business, but on the full moon, it has buy one get one free specials." - WishfulSpirit

        "Sometimes customers remind me of zombies, but I'm pretty sure that zombies are smarter." - MelindaJoy77

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        • #5
          Why does it come as such a shock to some people that banks, like any business, exist to make money? It's really not in the bank's best interest (pun not intended) to loan to people who cannot or will not pay them back; the bank may as well flush that money down the toilet.
          I don't have an attitude problem. You have a perception problem.
          My LiveJournal
          A page we can all agree with!

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          • #6
            On the one hand, I can understand the frustration by many business owners. Large companies structure their income to show a vast difference in profits on their tax return vs. their income statement; the tax return is essentially meaningless in determining the financial performance of a larger company.

            That said, many small business owners are very... errr... "determined" individuals. Determined to not notice that once they strip out all their expenses, they would have been way better off just getting somebody else to pay them for doing whatever it is they do.

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            • #7
              I had almost the opposite problem... although it wasn't really a problem. I got my mortgage right after the summer OT season and every paystub I could find was way high. Based on those, I could have gotten a mortgage half again more than what I have... probably could have afforded some kind of house, rather than a condo.

              However, the company isn't obligated to offer OT and I prefer to have payments I can easily make on my base income. It was funny, though, when the bank was willing to approve a huge mortgage I didn't need...

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              • #8
                Quoth Argabarga View Post
                So, you're either broke, or a fraud.

                Hey, guess what two kinds of people banks don't like? Go on! Guess!!!!
                Somehow I don't think the IRS will be thrilled either...

                Comment


                • #9
                  The days of getting a mortgage if you have a pulse are long gone.
                  I've seen one like that. She omitted all kinds of business expenses on her Schedule C to get a loan (you'd figure that the underwriter would ask some questions about her supposed 70% profit margin). About a month later she was back to amend the return to get a huge refund. I hope she had sense enough to apply to refund to the loan....somehow I wouldn't bet the mortgage money on that.
                  I'm trying to see things from your point of view, but I can't get my head that far up my keister!

                  Who is John Galt?
                  -Ayn Rand, Atlas Shrugged

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