Loans For The Self-employed

If you work for yourself, then finding a good loan deal can sometimes be difficult. With less means to prove that you have a stable income and so are not a risk, lenders are less inclined to offer you a good deal. However, with more and more people becoming self-employed this is changing, and there are some great deals around. If you are self-employed and need some help to find the right loan, then here are some useful tips to help you out.



Who is self-employed?



People classified as self-employed can be in a wide variety of jobs and pay categories. Anyone how operates a business as a sole proprietor, is a partner in a partnership, or an independent contractor, is classed as self-employed. If you also work in any role as a freelance agent, such as a consultant, then you are classed as self-employed also.



How to apply for a loan



Applying for a self-employed loan is much like applying for any other type of loan. All you need to do is have a decent credit history and be able to prove your income. How well you can prove your income will depend what business you are in and how long you have been self-employed. The better you can prove your income then the easier it will be to get a loan, which is why it is crucial to keep good business records.



What are the costs?



Although getting a loan if you are self-employed is becoming easier, the rates are still higher than for regular personal loans. This is because lenders see self-employed people as a greater risk, no matter how well they are currently doing. However, if you can show repeat contracts with clients over a few years, then you will be able to get a pretty decent loan rate. It is wise to shop around to look for the best deal, with a lot of the best deals being found online.



Loan insurance not worth it



If you are self-employed, don't be fooled into taking out the loan insurance. Although you might be covered for accident or injury, you are unlikely to be covered for unemployment unless you have completely ceased trading. Instead, take out adequate business insurance specifically for self-employed people. This will cover you for a lot more things and will save you money on your loan.



Self-certification



One of the biggest problems facing self-employed people is that you are often legally understating your earnings for the purposes of tax, which will hurt you when trying to get a loan. Lenders look at how much profit you are making, which of course is going to be understated to reduce your tax burden. However, a solution to this is to self-certify the amount that you earn. This means you inform the lender how much you earn, but you don't have to prove this with documentation. This will make it easier to be accepted for a loan, but will involve you having to pay higher interest rates. If you are self-employed, the easiest way to get a loan is to secure it against collateral such as property. Although you are putting the collateral at risk, if you know that you can pay the money back then it will get you a better rate and make the approval process easier.






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