Pay stubs, otherwise known as paycheck stubs or check stubs, are documents that employers provide alongside paychecks with a breakdown of an employee's wages. Check stubs can either be physical or digital, depending on how an employer pays their workers using various paystub maker services. While the law doesn't necessitate providing these documents, many government labor agencies have highlighted the importance of pay stubs. Some employees may not think much of their check stubs, but they can be more significant than they think. Given their intricate nature, workers can use paycheck stubs to keep track of their working hours and make major financial decisions.
However, that's only scratching the surface of what employees can achieve using pay stubs. These documents highlight a person's wages in detail, including their hourly rates and deductions. For this reason, they present the best proof of income. Therefore, employees can use pay stubs when seeking services from numerous government agencies and other entities. Check stubs can be beneficial when looking to rent apartments, acquiring property, and getting compensation in the unfortunate event of an accident. Still, perhaps the most prevalent use of paycheck stubs is for securing loans. Creditors and lenders often require pay stubs for loan and credit card applications. Keep reading to find out how check stubs can be of assistance when looking to secure a loan.
Personal Loans
For one reason or another, we may find ourselves in need of a personal loan. The application process for personal loans requires several documents, including proof of income. Pay stubs are arguably the best way to present evidence of earnings to lenders as they are thoroughly detailed. Lenders use various criteria to determine whether a loan applicant is eligible for credit. What's more, apart from eligibility, creditors must also ascertain the limit of your loan.
Automobile Loans
Another common type of loan that people can secure using pay stubs is an auto loan. While the application process for car loans may be similar to personal loans, lenders usually use different criteria to determine loan eligibility and limit. Hence, pay stubs remain the best way to provide proof of income when seeking auto loans. Depending on how much you'll be financing the vehicle yourself, creditors can determine an appropriate limit for you. Moreover, some lenders may require you to provide several pay stubs from previous payments for confirmation purposes.
Refinancing Mortgages and Other Loans
There are many reasons why you may want to refinance a mortgage or loan. Perhaps the most significant reason is to save money on your previous loan. Although it may seem simple enough, lenders usually take plenty of precautions to mitigate risks when refinancing loans and mortgages. Consequently, all creditors must ensure that you can pay for your subsequent loan once it is approved. Therefore, lenders use pay stubs to determine a person has a steady income. Although paycheck stubs are not necessarily proof of future income, having several of them from previous wages increases the chances of approval.
How Long Should You Keep Your Pay Stubs
While there's no denying that pay stubs are requisite documents, it's vital to know how long you should keep them. Since lenders and other agencies may require pay stubs from a few previous payments, a good rule of thumb would be to keep records from a couple of months. This also comes in handy when it's time to file taxes.
Final Thoughts
Although paycheck stubs may not seem like vital documents, they can be quite significant to both employees and employers. For this reason, business owners should ensure that they issue workers with these documents. As highlighted in this article, pay stubs provide the best proof of income when making loan applications. While there are several other uses for them, this is perhaps the most widespread use of paystubs.
