Can I Get a Loan If I’m Self-Employed?

Author · Modified on 20 October, 2023

Yes, you can get a loan if you are self-employed! Although your lender may need additional proof of income from you, there are many options for you if you need money now but are self-employed.

However, people who are self-employed are seen as not always have the most stable of income, even if they have been going for many years, so some lenders approach them with caution. So whilst it might be a little more difficult to do so than if you are at a W2 job (a job on payroll) – you should ideally be self-employed for more than 6 months to maximise your chances of approval.

This guide will show you the steps necessary to have the best chance of getting a loan if you are self-employed.




Key Points:


  • The US boasts more than 16 million self-employed citizens, for whom it is possible to attain loans.
  • It may be more difficult to secure a loan if self-employed as your income appears more volatile than if on a payroll.
  • Make sure to have relevant documents to hand (tax statements, 1099s) to provide to your potential lender.
  • If you have been self-employed for a long period of time then you are more likely to gain the trust of a lender.
  • Having a strong credit history will make self-employed borrowers more attractive, so trying to improve your credit history won’t go amiss when trying to secure a loan.


Why Is It Harder To Get A Loan If I Am Self-Employed?


Being self-employed can make applying for a loan a bit more complicated than if you are employed — you don’t get pay stubs or W-2s from an employer that show you earn enough income to make monthly payments.

Therefore, lenders will be much more careful and reluctant to offer out a payday loan to a customer who is self-employed, as there is less of a guarantee of income and therefore, lenders will feel that there is a higher chance that the applicant will be unable to repay their loan.

However, there are ways to increase your chances of being accepted for a payday loan if you are unemployed.


How Can I Get a Loan if I am Self-Employed?


If You Are in a Stable Profession


There a lot of good professions which would fall under the self-employed category, and if you work in one of these, your chances of being accepted for a loan are very strong. These can include such professions as:

  • Dentist
  • Builder
  • Private Contractor
  • Plumber
  • Electrician

Furthermore, if you own a reputable company and can provide strong financial records with good and regular revenue, being self-employed may not be an issue at all!


Check Your Credit Score


Without a good credit score (most lenders look for the 600-700 mark in order to qualify for a loan), it can be tricky to get a loan, and if you are self-employed, it can be even trickier! Therefore, you must check your credit score before applying for a loan to avoid disappointment, which you can do for free through your bank – online or through your credit card provider.

It is also important to make sure your credit report is error-free, as if there are mistakes which worsen your score, this will hinder your chances of successfully applying for a loan.

If you check your credit score in advance, this could give you peace of mind before applying for a personal loan, or even give you time to find ways to improve your score before you apply.


If You’ve Been Self-Employed For Longer, You’ll Increase Your Chances


The longer you have been self-employed, the more chance you have of being accepted for a payday loan.

If you state in your loan application that you have been self-employed for just a short period of time, payday lenders may view your occupation status as a result of being laid off or fired from a previous occupation.

Therefore, if you have been self-employed for an extended period of time, good lenders will be more likely to consider your application – especially if you can provide proof of a stable income.


What Information Do I Need To Provide For A Self-Employed Loan?


Personal loans for self-employed people can often require more paperwork as your application will be slightly less common than an application from an individual working in a W2 job, for example. Therefore, it would be a good idea to round up the necessary paperwork ahead of time to ensure a smooth application process with your lender.

Each lender has their own requirements regarding which documents are needed to apply, and these could include:

• Tax statements (tax transcripts, returns or schedules);
• Bank statements;
• Profit & loss statements (from your company).

Most lenders will likely want to see at least two years’ worth of income documents with your application, because they want to see a pattern of consistent income. The longer you’ve been self-employed and can show that you have been earning a semi-consistent income the better your chances are of qualifying for a payday loan.


Before setting a credit limit, the lender will want to be confident that you can pay it back.


Make Sure To Find The Right Lender


Since different lenders have differing policies on payday loans, especially if you are self-employed, it’s very important to shop around the different potential lenders before applying with a lender that suits and can accommodate your needs.

Some lenders offer what is known as a ‘prequalification process’, whereby you can see whether the lender is likely to approve your loan and the terms that you would qualify for before you apply.

After you’ve prequalified with multiple lenders, it is time to compare the opposing rates and terms you could receive. This process allows you to choose the best personal loan for your specific situation.

Most people choose the lowest rate, but depending on your situation, you might also want to consider other factors too, including:

• The ratings and reviews of the potential lenders;
• If there are any specific policies for self-employed people;
• Referrals from your network.

Only after you have considered these factors should you look to apply for your payday loan.


Repaying Your Payday Loan


If your lender approves your loan and you are successful in your application, you will want to start thinking about how you will be repaying your payday loan in order to avoid any unwanted debt.

Usually you’ll be given up to a month to pay back the money you borrowed, plus interest. The most common way to pay back a payday loan is through your bank debit card. When you get the loan you agree to let the lender take the money from your bank account.

You could payback your loan by enrolling in autopay. This could help you in four ways:

• You’ll never have to pay any late fees;
• You won’t have to worry about making loan payments;
• Many lenders offer small rate discounts for signing up for autopay;
• You’ll build credit automatically (even one late payment can lower your score).

Overall, personal loans can be a great option if you need to borrow money for home upgrades, car repairs, debt consolidation or other bills. However, it is important to explore all your options. Being self-employed can make it slightly tricker to successfully apply for a loan, but all in all, you absolutely could get a loan if you make sure to follow the steps listed above.

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