Not everyone has a nine-to-five job, just like not everyone has employment that pays with a paycheck and stub. In a world where steady employment and loyal companies are getting hard to come by, many people are contracted or self-employed, and income isn’t necessarily as easy to prove by bank or lender standards. So what happens if you’re one of those people and you happen to need a car? Chances are you’ve run into a situation where your cash income or bank statements weren’t enough proof to get the loan. If your income is less traditional, here are some ways to prove you have it.
It’s Time to Start Recording Everything!
The first step to proving cash income or income from a non-traditional employment situation is to state it—or record your income as it comes in. How do you do that? Simple: you write down or enter all income earned in one place. While some people still like to use the old pen and paper, consider spreadsheets and software programs as well. If you can, take it one step further and copy monthly bank statements with highlighted matching deposits or copies of deposit receipts.
To state income, keep a log or ledger, here’s how:
Pen and paper: Head to the office-supply store. Grab an account ledger. Anytime you get cash from business, write down the date, the service provided, the customer and the amount earned. Any supporting documents should be added to an envelope you keep with your ledger. This may be invoices, letters, deposit receipts or bank account entries.
Create an Excel Spreadsheet: If your computer came with Excel, it’s time to learn how to use it. A spreadsheet performs multiple functions. You can add dates, services, notes and create formulas to keep a running tally on your year-to-date earnings. Your envelope of supporting docs can still be physical, or you can scan and add links or a file to your computer or spreadsheet.
Invest in Software: There is software that can help you manage your earnings. Try QuickBooks, or get free software like Mint.com. Do your research to find which programs are the best fit for you, and then choose one.
Use an App: Are you a smartphone junkie? Is it in your pocket most of the time? If that’s the case, use it as a tool for recording income. Try apps like FreshBooks, which make conducting business and recording income as simple as swiping and tapping that phone that’s always with you.
Get Extra Support to Prove Your Income
One of the most challenging aspects of proving your cash income is having people believe that it’s income, or that other cash deposits aren’t. This is where supporting documents are essential. To prove that cash is income, use:
- Tax statements
- Letters from those who pay you, or from agencies that contract you out or contract your services
- Duplicate receipt ledger (give one copy to every customer and keep one for your records)
To prove that cash wasn’t income, use:
- Letters from those who gifted cash
- Attorney documents from inheritances
- Letter/receipt from situation, like lottery winnings, casino winnings, etc.
The more information you can offer to prove your cash income and get your car loan, the better.
Where Tax Returns Fit In
Those who view the IRS as an evil entity don’t always realize that there’s an upside to the organization: tax returns are proof that you made income and paid your taxes. When you haven’t been good about keeping everything in one place, but you know about how much you made and filed a return, use those documents as proof of income.
Keep Your Credit Clean or Fix It
Your credit is the other big deciding factor in a loan situation. If you have strong credit, or if you can prove you’ve been working hard to fix it, it can go a long way to making your overall financial picture more secure and loan-worthy. If you don’t know where your credit is, take a look at it today. Not only do you get one free credit report from each agency every year, you can also get scores for free from places like Credit Karma. Not to mention, Credit Karma will guide you in raising your score once you’ve signed up for their services.
Proving cash income doesn’t have to be difficult—it’s as simple as keeping a log, collecting supporting documents (invoices and receipts are key!) and paying your taxes. Even still, there will always be lenders that won’t want to finance your car without that traditional employment situation, but there are always those willing to work with those in an atypical situation as well.