getting credit when paid in cash

Getting credit if you’re paid in cash

Information verified correct on December 6th, 2016

Getting credit when you’re paid in cash is a tough process as many banks require a minimum of two years tax statements.

If you live on an irregular income dominated by cash payments, you may find it more difficult than others when trying to obtain a mortgage or credit card. Many banks and lenders see you as a high risk borrower and believe that you could be a risk to their investment.

But there are number of people who are paid in cash for legitimate reasons, whether you’re a poker player, an inheritance recipient, winner of the lottery or an athlete who lives off winnings, it all comes under the category of being ‘self-employed’ so there may be a few steps you need to take before applying for a loan.

Banks consider these types of jobs as unstable employment as they believe that there is a high chance of the loan contract being cancelled. As a result, many lenders have stricter guidelines such as;

  • Evidence to prove you’ve been in that occupation for a minimum of two years
  • Evidence of all your income plus endorsements

Tony G

  • Winner of the Asian Poker Tour 2006
  • Established the Lithuanian Poker Federation
  • Vice president of the Lithuanian Basketball Federation
  • Awarded the Shining World Leadership Award 2008

How did the banks first respond to your application for your first home loan?

It would be near impossible to get a loan from a bank for a poker player. They don't want to deal with poker players.

How did you go about getting a credit card or a personal loan?

Could not really get a credit card without a large deposit. I made a deposit and got all the cards I wanted. I think you can get a small limit credit card if you have a good credit rating. But to get say a large 20k limit you would not have any hope without proof of income.

I made a deposit and got all the cards I wanted.

Any tips for fellow poker players who are looking to obtain credit?

If you want to get a home loan and have a deposit look for solicitors funds or other private funds. Its easy to borrow now days but you do need a large deposit at least 25% to get a loan. To get loans without any collateral would be very hard. Perhaps look for a guarantor.

Reporting income when you’re paid cash

Depending on the state you live in and the tax regulations, you may or may not be required to pay tax - but having your income recorded will mean that you can have the documentation to show to the banks. On the other hand, any sponsorships, endorsements, or other gains earned because of your career could be taxable. A range of taxes could affect your ‘small business’ so before you start earning income again you’ll need to understand what to do to comply with the Australian government taxation regulations. In these cases an Australian Business Number (ABN) may be required, so consulting an accountant will ensure your process and application is compliant.

Learn more about getting an Australian Business Number

Another option is to get a portfolio of shares, managed funds, bonds, cash, term deposits, that pay you enough income to service a mortgage - so it may be worthwhile investing in assets that give you a return on a monthly basis. With any investment, it’s important to remember that professional advice is highly recommended.

What home loan options are there for people paid in cash?

You may be able to borrow up to 95% of the property value plus Lender’s Mortgage Insurance (LMI) depending on the type of earnings or cash you receive. Depending on the loan type, there could be a maximum to the loan amount you can borrow. While lenders will require a minimum of two years evidence of your income, they also take into account any endorsements or any other extra earnings into account and assess them depending on your personal and financial situation.

Lender’s will also need certain documents as proof of the income that you have reported for your loan. These will mostly include;

  • Past and current employment contracts
  • Any endorsement contracts
  • Two years of tax returns
  • Bank statements
  • Any other income streams such as investments and assets

Did you know?

If you’re a professional athlete, there are certain types of sports that are favourable to the banks. Discounts could be available to you as well after you’ve been approved for the loan, as you may qualify for a professional package. These include; cricket, rugby, NRL, AFL, soccer, golf, basketball, motor sports, cycling, tennis, surfing, swimming and equestrian.

Low documentation loans

The low documentation (low doc) loan solution is designed for the self-employed, or those who have a small business. The solutions let you apply for the finances you needs without all the financial statements or documentation that is usually required. This usually means that you will need to start your own small business that uses your cash as corporate income and pays you a taxable income.

Find out more about low doc loans

Another option to consider is to gain support from a parent to take out a home loan on your behalf, if your parents agree and have a good credit history and are eligible. Your parents can also choose to go guarantor, which means that your home loan is secured by the equity in your parents property. However, if you default on the loan, your parents could be held responsible too.

Find out more about guarantor loans

What are credit card options are there for people paid in cash?

Unfortunately, if you’re paid in cash you’re limited to a few credit cards due to a lack of credit history. But the good news is, you can use the resources you have to build up a credit history and hence increase your credit limit which then opens up your options for credit cards.

Store credit cards are a great way to start, as you can probably acquire one with little effort. There are minimal credit checks and you can apply at the store directly. These cards are a good choice for people who have little to no credit. Since it is easy to get, it is a good choice for those with no credit and build up your credit.

Personal loan options for people who are paid in cash

Many lenders will be unwilling to give you a personal loan without the minimum of two years tax assessment. If you don’t have the documentation to support your loan, then you may want to consider reporting your income (see above). Alternatively, for a short term solution you may want to consider giving up an antique to a pawn shop.

How do I apply for a paid in cash home loan?

You may want to consider getting into contact with a mortgage broker who can help you find a loan. They will be able to help you with the whole process from start to finish. Alternatively, you may want to browse through our featured low-doc home loans and store credit cards to find one that suits your personal and financial situation. After you’ve decided on a product, then you can click apply now to be safely redirected to the provider’s enquiry page.

Getting paid in cash

Speak to an accountant today to help you establish a credit history

Frequently asked questions if you’re getting paid in cash

  • Will I get into trouble with the ATO? According to the Australian Taxation Office, online poker players aren't required to pay tax - however it is always wise to check the ATO site intermittently. But you will need to declare prizes you receive from an investment-related lottery offered by an investment body such as a bank, building society or credit union. This could include cash, low-interest or interest-free loans, holidays or cars. If in doubt, you should always consult an accountant.
  • Can I get and contribute to self-employed super when I don’t have a taxable income? Certainly, although you will be responsible for your own contributions. There are number of eligible super funds for the self employed; for more information or to start an superfund please log onto Industry Superfund.

Shirley Liu

Shirley is finder.com.au's publisher for banking and investments. She is currently studying a Masters in Commerce (Finance) and is the author of hundreds of articles. She is passionate about helping Aussies make an informed decision, save money and find the best deal for their needs.

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