Loans that do not require the borrower to provide traditional documentation of their income may be obtained through alternative income documentation.
Rather than relying on tax returns or pay stubs to show income, borrowers can offer alternative forms of evidence, such as bank statements or a letter from their employer, to demonstrate their capacity to repay the loan.
Loans that are created to provide financing to those who do not have a traditional employment source of income, such as self-employed persons or those receiving income from investments or other non-work sources, are known as alternative income documentation loans.
Loans that are offered with more stringent eligibility criteria and higher interest rates than standard loans can be attributed to the greater risk taken on by the lender due to the use of alternative forms of income proof.