Personal Loans For Self-Employed: Challenges and solutions

Self-employment can have lots of benefits. You can often set your own rules, aim for your own goals and work how you like.

But when it comes to applying for loans, it can mean you need to take a slightly different approach.

Here are a few things to think about if you’re self-employed and thinking about applying for a personal loan.

What are the challenges?

There can be a few additional challenges for people who are self-employed and applying for a loan.

Here are some of them.

• Income verification issues: When you’re self-employed, you don’t have access to a pay slip to prove what your income is. That can mean a bit more effort has to go into proving that you have a solid and reliable source of income that can be relied on in the future to repay your loan.

• Limited credit history: Being self-employed doesn’t directly impact your credit history, but sometimes it can be harder to get credit, which may reduce your ability to build up a strong track record.

• Higher perceived risk: Some lenders might perceive that you are a higher risk as a self-employed person than you might be if you were employed by someone else.

• Documentation hurdles: To counteract some of these issues, you might have to provide more paperwork. That could mean providing proof of your trading history over a couple of years or your tax returns.

At better finance™️, we are committed to simplifying the loan process for all types of borrowers.

There are solutions to overcome these challenges

Get your documentation sorted

You can make the application process smoother from the outset by getting your paperwork in order early. That might mean getting together things like:

• Details of your income: Bank statements will help, as well as tax returns. Your accountant may also be able to provide some projections if necessary.

• Proof of business stability: You can show you are likely to have an ongoing stream of income by offering proof of things like contracts and invoices. This is particularly helpful if they are for work that will continue into the future.

Improve your creditworthiness

Having a good credit score will help your application.

If yours needs some attention, now might be a good time to start taking steps to get it sorted.

You can do this by checking your credit report to make sure it is accurate, paying your bills on time and avoiding making excessive numbers of credit applications.

Consolidate your debts

You could also improve your picture by consolidating your debts. If you have a lot of small debts, it might make sense to combine them into one, which could be easier to manage. If you can get a lower interest rate on the new loan or pay it off more quickly, you may also be able to save money.

Benefits of fixed interest

If you are taking out a personal loan, you’re likely to be offered a fixed interest rate for the term of the loan.

This means that your interest rate won’t change, and you will know what your repayments will be.

This can be really helpful when it comes to budgeting, particularly if you’re managing your finances as a self-employed person and need to know what you have to put aside.

Tips for a successful loan application

Use loan calculators

A loan calculator can give you an idea of what your repayments might be for various loan amounts. This can help you work out what you can afford.

Calculators can be a really handy tool in helping you plan and to guide you in working out the most effective way to repay your loan. You can check out the better finance calculator here.

Be transparent

The more open and transparent you are with a lender, the smoother the application process is likely to be. Particularly as a self-employed person, you will need to be prepared to provide the evidence necessary to prove that you can afford and can repay the loan.

In return, the lender will be transparent about the terms and conditions of the loan and how you should expect it to work.

Choose the right lender

Working with the right lender can make all the difference. The better finance™️ process will match you with a lender who is an appropriate fit for your circumstances.

Seek expert help

Having an expert on your side can make all the difference when it comes to a loan application.

The team at better finance™️ is on hand seven days a week to help you make your personal loan application, and we can help you with any questions that might arise as a self-employed person.

We are experts at helping borrowers navigate more complex loan applications.

How better finance™️ can help

• Simple Application Process: We have a straightforward online application process to guide you.

• Swift Decisions: We are committed to getting you an answer in a timely manner – usually within a day or two of receiving your application.

• Expert Support: We are here to help at each step of the way, no matter what questions you have.

If you’re ready to get going with your personal loan, drop the team at better finance™️ a line today.