There can be few things in life sweeter than deciding to break out on your own and go self-employed. But it’s a major life choice that can have significant implications on your finances, at least at first. That’s why so many self-employed people take out loans to get off the ground.
Of course, with COVID-19 damaging so many self-employed businesses, there are also bound to be those individuals who are looking for a little extra help to keep them afloat through these dark times. Self-employed loans can help here too. But what kind of self-employed loans are available and how do you apply?
Types of self-employed loan
Personal – Also known as an unsecured loan, you’ll need a good credit score to apply for this loan, as you won’t need to secure it against any assets you own.
Secured – If you don’t have any documented income as a self-employed worker then you might need to get a loan that’s secured against the equity in your home as security against the cost of the loan. You’ll probably get a lower rate than with a personal loan and might be a better option than trying to get approval for unsecured finance when you know it’s unlikely.
Guarantor – This refers to bringing a third party in (usually a family member) who agrees to make repayments on your loan if you can’t for any reason. Be aware though, that the interest rate on a guarantor loan will probably be higher than a standard personal loan.
Business – If you have a solid history to fall-back on as a self-employed business, then you might be able to apply for a business loan and secure against your business assets in place of your personal assets.
Vehicle – Even if you have a history of bad credit, you should be able to get a decent second-hand car on finance if you go through a respected supplier such as Go Car Credit. In certain professions, having access to a vehicle can be make-or-break, so this is definitely something certain self-employed for potential self-employed individuals might want to consider.
How to apply for a self-employed loan
First of all, you’re going to need to gather together all of your financial documents (including bank statements), as well as some identification, proof of your address and your latest tax returns. Then, the lender will need to check your eligibility for a loan, which can be undertaken without affecting your credit score. Finally, it’s advised that you compare loans from a variety of lenders and go with the deal that works best for you.