Loan applications are a huge and consists of complex web of document formalities. Not all loan applications are verified for employment, some of those that rarely show any red flags. There are just a number of formalities when you apply for a car loan. However, that’s not the case with personal loans. Almost all personal loan lenders tend to worry about approving loan application to fraudsters who can use the money for money laundering, terrorism financing, and other types of fraud. This is the reason why personal loan lenders verify employment and bank statements to detect any hidden red flags.   Most people don’t apply for a personal loan because they’re afraid of going through the employment verification process. Employees don’t want their bosses to know that they’re applying for a loan. There have been cases where people pawn or sell their personal belongings to avoid applying for a personal loan. Some people are just scared or don’t trust banks for employment and bank statement verification.    Before applying for a loan, borrowers need to learn how lenders verify employment and other documents from your application. A bank wants to give you a loan as it benefits them, so if everything is perfect in your application, you don’t have anything to worry about. Every new loan for banks means new interest collected, so lenders usually don’t reject loan applications on tiny anomalies.    Banks have to verify some applications for complying with regulations. Most verification processes are less strict than borrowers believe them to be. Knowing if lenders verify employment and bank statements can help you make up your mind.  

How Do Lenders Verify Loan Documents?

• Larger loans such as mortgages and amounts at the maximum limit of personal loans are more likely to be verified. 
• Loans that qualify for government programs like HUD mortgages are usually a prospect of keen employment verification.
• Borrowers with bad credit scores, lower-income, or a history of credit-related issues are most likely to go under verification to confirm how big of a risk they pose to the bank. 
• Borrowers who report a higher debt-to-income ratio are most likely to go through verification for eliminating future risks. 

• Phone calls: Banks or lenders use phone calls because they are the most time-saving method. The lender will reach out to your Human Resource department or call your supervisor directly. Some organizations have policies of lenders talking to only the HR department to eliminate any privacy issues. 
• Email: Email for employment verification is used when you provide an address for your employer or when the lender is unable to reach your organization using calls.
• Additional Documents: Banks require additional documents as they don't involve other parties in the loan application process. The lenders will ask for a copy of investment accounts or bank statements for the last 2 months, credit reports, or tax return documents.

Why Do Lenders Verify Employment?

• Being denied a loan in the last year. The bank wants to know why the other bank rejected your application. Most of the time, this doesn’t play well in the favor of the borrower.
• Being at your current job for less than 2 years. Most loan officers will verify your job stability over the course of 5 years and how long you have been employed at the current place.
• A poor credit score is one of the biggest red flags. Poor credit score usually leads to loan rejection. These types of loans are harder to sell for banks so they usually stay away from the hassle. 
• Anything at the limit in your finances, such as the debt-to-income ratio is another red flag.

What Do the Lenders Ask During Employment Verification?