Self employed? You can still get a personal loan! Personal Loans Now has access to the huge range of direct lenders on the Monevo lending panel who can provide all sorts of loans, including personal loans for self employed. Apply now!
Find out how to get a loan if you’re self employed.
- Where to find personal loans for self employed people
- Documentation required for self employed Loans
- Self employed loans for bad credit
- Different types of self employed personal loans
- What to look for in a self employed personal loan lender
Personal Loans for Self Employed
Finding a lender to offer best personal loan rates for the self employed can prove more difficult than you may imagine. However, there are businesses in the loans market which specialise in these types of loans. Personal loans for self employed people are not always the same as other loans. Lenders often design more flexible loan contracts for self employed individuals.
Finding a direct lender that offers personal loans for self employed people might also make the search harder. It might be helpful for you to take loan advice from an experienced professional.You may find that a broker has a wider selection of lenders that you can choose from. Especially relevant, this article gives information, detailing where you can search for a personal loan if you are self employed. Personal Loans Now explains how to maximise your chances of applying successfully.
Applying for a Personal Loan For Self Employed
The problem with offering personal loans to self employed people is that it is often difficult to determine the financial situation of the borrower. Lenders who do offer loans for self employed often rely on self certification.If you don’t have any self certification, you can still apply for a personal loan because often lenders will use affordability and credit checks as their main criteria for lending.
Documents Required for a Loan
As with any other application for a personal loan, if you are self employed you will need to provide documents of:
- Proof of income
You can use the following documents:
- Driving licence
- Utility Bill
- Bank statements no older than three months
If you are renting your home you will need to show how much rent you pay and you must show a recent utility bill (less than 3 months old) for proof of address.
Personal loans for self employed with no proof of income
If you do not have any proof of income, you can use your bank statements instead. These will help to prove what is coming into your current business account. The lender will also be able to see how much you pay out each month. Bank statements are a good way to prove how responsible you are with finances and whether you adhere to limits for overdrafts.
Self Certification On Earnings
Ever since the financial crisis of 2007/8 took hold in the UK, it has become more difficult for a self employed person to receive approval for small personal bank loans. Before the so called credit crunch, personal loans for self employed people were simple to get via self certification.
Self certification is a simple method of declaring an annual income. You do not need to provide proof of income, in the form of monthly salary slips, or annual business accounts. In the past, lenders accepted self certification when a self employed person requested a personal loan. This group of borrowers welcome self certification, since many applicants have different working patterns to those in straightforward PAYE employment. The self employed often draw a low monthly income and then pay themselves bonuses each year. Those who have a single person limited company take their earnings by drawing a low monthly salary and dividends once a year.
Do Lenders Accept Self Certification?
Most lenders were happy to accept self certification until the financial crash. The financial crash highlighted the problem of many borrowers exaggerating their earnings in order to obtain loans and mortgages. Self certification proved to be the downfall for many people who overreached their own borrowing capacity. When times became more difficult they were unable to repay their loans. They defaulted on payments.
As a result of this, lenders changed their attitude to self certification. Times have now moved on and self certification is no longer accepted by many lenders. Nevertheless, it is still possible to get a non guarantor personal loan if you are self employed. However, lenders are now far more rigorous in their background checks. They will want to see detailed records of accounts if you are self employed.
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Bad Credit Loans for Self Employed
As with other applicants, anyone with a good credit record is more likely to be successful when applying for a self employed personal loan. But, a lender might also require you to answer some searching questions about your previous borrowing habits. One way to avoid disappointment is to take steps to find out exactly how you stand with regards to eligibility before you make an application for a loan.
Improvements in the use of credit records also makes lenders more willing to allow borrowing from the self employed.
Why Do Lenders Look At My Credit Score
In the 21st century, the chance of anyone being in the same kind of employment for many years has practically vanished. All lenders are having to adapt to a completely new scenario when it comes to approving personal loans.
Using credit records held by the three UK credit reference agencies, lenders can see how an applicant copes with finances. Your lender can look to see whether or not you have indulged in reckless borrowing in the past. As long as your credit score and history of borrowing is good, this will help to facilitate an application for a personal loan. Your lender will decide whether to accept or refuse your application.
How can I get a loan for self employed if I have bad credit?
With more people in the UK becoming part of the self employed revolution, lenders are acutely aware that they need to compete for a share of the self employed personal loans market. Personal loan rates are now often as favourable as those offered to an employed applicant. Lenders want to have a good portion of this lucrative loans market. They are just as willing to allow the self employed to refinance to consolidate debts as they are with other employed applicants.
Types of Self Employment
The self employed are categorised into different types. Some people are purely independent and receive work on an ad-hoc basis. Others work with rolling contracts or fixed term contracts. Being on a regular contract might make it easier to get a personal loan if you can prove that the contract is being constantly renewed e.g. every 6 or 12 months. Some lenders will want to see continuity of renewal for a period of at least two years whilst others will accept one year.
If you have recently become self employed but have a good record of previous employment in the same industry, a lender will look more favourably on your application. However, most will still require a minimum of two or three years of business accounts.
Types of Personal Loans for Self Employed
There are several different options for personal loans for self employed. Look carefully through them to find the one best suited for you in your current situation.
Specialist Lenders For Self Employed Personal Loans
There are a number of lenders who specialise in providing secured personal loans for self employed people. Amounts from £500 up to £100,000 are available but larger sums are generally granted on a secured loans basis.
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Anyone who owns their own business might find they require a lump sum often for the same reasons as those people who are employed. While you might need a loan for transport or to expand business premises, a self employed person might just want to make home improvements or to pay for a wedding. Whatever the reason finding the right personal loan is very important and knowing where to look is at the heart of getting a good deal.
Secured Or Unsecured Personal Loans For Self Employed People
If you are self employed and considering taking on a personal loan you might want to think about whether a secured or low APR guarantor loan is a good option. The interest rates for this kind of loan are usually lower. You may be able to put up your business premises as collateral. As long as you are fully confident that you can make the repayments this is a good way to save money when borrowing. Alternatively, if you do not want to risk putting your home or business in danger of repossession, an unsecured personal loan might be the best option.
Personal Loans For Self Employed Home Owners
If an unsecured personal loan is proving difficult to obtain there is another option. Self employed homeowners can take out some equity from their property. Some lenders have cut their request to see three years business accounts down to just one year.
Once again a good credit record is essential when looking for personal loans for self employed people. Even with a good credit record, you may be turned down. A specialist lender will sometimes accept one year’s accounts with a projection of the next year’s trading, as long as this projection comes from a reputable and certified accountant.
Interest rates for this kind of loan may be higher than normal and you may be required to pay an arrangement fee to set up the agreement. However, it is one option to consider when you need to borrow money but are relatively new to being self employed.
What to look for in a Personal Loan Lender
Looking on the Internet to find a lender that will provide a loan to a self employed person is a good way to find out what is available. Always make sure that the lender is registered, reputable and ethical before committing to any agreement. The Financial Conduct Authority regulates genuine lenders and lists them on the Financial Services Register.
Figures for the self employed in the UK are on the rise. In March 2007 the number of self employed in the 35 to 49 age group was 12%. By March 2016 this has risen to 13.1%. As a proportion of the population this is significantly higher and the trend looks set to continue.
Finding A Self Employed Personal Loan
The search for a self employed personal loan is now much easier than it used to be. Money advice websites offer comparisons for interest rates and terms and most have an eligibility calculator and loan payment calculator. These give you a good indication of whether you will receive an approval and how much you can afford to borrow.
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There are other factors, however, that might apply to an application for personal loans for self employed people. If you do not own all of your business, then a lender might insist on you owning a certain percentage e.g 20% or 25%. Partners in a business will be treated to the same credit checks. Regarding directors of limited companies, even one man businesses, lenders will examine how much basic salary you draw and how much is paid to you as annual dividends.
Personal Loans for Self Employed
More and more people are taking up self employment by starting up their own business and becoming contractors. Lenders are becoming aware that they need to accommodate this new employment status. At Personal Loans Now, we have access to Monevo’s lenders panel which has huge range of lenders, some of whom specialise in offering cheap rates for self employed people. When we receive your application, Monevo’s lender matching technology will scan it and forward it to the lenders who they detect will be most able to help you. Apply now, and you could receive the money today, if approved.