More and more hospitals are turning to travel nursing to fill staffing vacancies. Travel nursing can be a temporary career move or a lifetime decision. Travel nurses work for short-term contracts that are generally 13 weeks, but can also last as long as 26 weeks.
There are many pros and cons to working as a travel nurse. One of the benefits of travel nursing is earning significantly more money than nurses working in permanent positions.
On the downside, it can be difficult to get a loan due to the way travelers are paid and the employment variability involved. As a travel nurse, there is much more to consider when trying to get a loan.
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How Does Travel Nurse Pay Work?
Typically, travelers are paid weekly by their travel company. This amount is determined by the contract, which is signed by the traveler through their company and with the facility they are working for during the contracted period.
The amount paid is a sum of a taxable hourly wage and untaxed stipend for housing, meals, incidentals, and relocation. The amount of money for the stipend is determined by the government, and is based on the zip code location of the facility where the traveler works.
Travelers ultimately make more money than nurses in permanent positions because of the stipend included in their pay. Earning extra income seems like the perfect strategy to secure a loan, so why is it more challenging to do so?
Consistency in Pay
Lenders want to approve loans for customers who they consider to be capable of timely repayment with interest. There are many factors that lenders consider before approving a loan application, and income and employment stability are critical considerations.
In many ways, travelers defy the stable employment aspect of receiving approval for a loan. Every 13 weeks, a traveler changes their job and location. To lenders, this can be perceived as unreliable or a higher risk for loan repayment.
What Can a Travel Nurse Do to Increase the Chances of Getting Approved for a Loan?
Research the Basics
It is important to research the basics of getting approved for a loan. Additionally, the approval requirements can differ for a car loan versus a personal loan or home loan. There are many credible experts who offer advice on how to financially prepare for loan approval. NerdWallet has comprehensive resources regarding loans, among others.
Network with Other Travelers
There is always an opportunity to learn from other travelers who have previously acquired loans themselves. Ask travelers which companies they used to secure a loan, either in person or through Facebook groups for travelers.
Also, other travelers may know a lender who is accustomed to working with travelers or per diem workers. These lenders would understand the travel pay component for the application process, in turn increasing the chances for loan approval.
Consistency
While this advice may seem like an oxymoron, there are still ways to demonstrate consistency and reliability while completing different travel contracts.
- Since many lenders will require a steady employment history, it may be beneficial to work as a traveler for at least six months to a year before applying for a loan.
- Work with the same travel company. While travelers can take contracts all over the country, you can maintain a steady employer history by working for the same travel company.
- Signing an additional contract at the same facility and working for more than 13 weeks is another way to also show consistency.
Decrease Debt to Income Ratio
Another factor that increases the likelihood of loan approval is a debt-to-income ratio below 43%. As a traveler making increased income, it is important to decrease existing debt when possible before applying for a loan. This will reduce the debt-to-income ratio and is especially critical for a mortgage, as a larger amount of money is being borrowed.
Consider Applying for a Loan at a Credit Union
Credit unions are different from commercial banks for a multitude of reasons. According to credit.com, it can be easier to get approved for a home loan at a credit union with lower rates and fewer fees. Travelers may also benefit from the personalized experience of working with a credit union, as well as have the opportunity to explain the intricacies of travel contracts and pay (as well as credit scores).
Use Paychecks Instead of W-2s to Prove Income
Proving income is one of the most important steps for a lender to determine if the applicant will be able to repay a loan. Income can be verified by a W-2 that lists taxable income for the year. A traveler’s W-2 would list a much lower income compared to a traditional paycheck because it would not include the untaxed stipend, which is the largest portion of a traveler’s income.
When submitting documentation for the loan application process, paycheck stubs should be submitted instead of W-2s when possible. However, some lenders will require both forms of income proof. Since paycheck stubs include the stipend, they will display a higher income for the borrower.
Even if a lender accepts pay stubs instead of W-2s, the lender may not consider the stipend as income. Some lenders will require the loan applicant to maintain the stipend as income for six months to a year in order for it to be considered consistent income and not a variable “bonus.”
Apply for a Loan with a Partner
When considering a home loan, it can be advantageous to apply with a partner who has stable income. Two people applying for the loan will have a higher combined income and potentially a decreased debt-to-income ratio, making them appear less risky to a lender. In this scenario, there is higher income to pay back the loan and more stability than a single traveler applicant would have on their own.
As there are both benefits and risks involved in applying for a loan with another person, this decision should be thoroughly researched before moving forward.
Overall, travelers can effectively be approved for loans with the right financial preparation. While it can be more challenging to prove stable employment and increased income to lenders, these strategies will boost the chances of approval.
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