Self-employed loans – Find finance for you and your business
If you run your own business or are in the self-employed game, you might be living the Australian dream. But, having a variable income stream can be a fly in the ointment when it comes to getting credit from traditional lenders. If you’re concerned you won’t qualify, BestFind dives into the details of self-employed personal loans below.
Read on to learn about how they work, the requirements, and finding the loan type that best drives your personal or business projects.
What’s a self-employed loan?
A self employed personal loan is a bank balance top-up provided by lenders to people who work for themselves. If you align with the lender’s requirements, you can cash out a lump sum advance of up to $100,000.
Typically, personal loans have a phenomenal range of uses. As a self-employed person, it means you can use the funds for personal projects, business purposes, or in any way you please. What makes the finance arrangement even more flexible is the ability to repay the debt over terms of up to 10 years.
Personal loan requirements for self-employed people
When it comes down to it, requirements for self-employed borrowers are no different from the requirements for employed borrowers. Think of it in terms of the risk faced by the lender. Before the lender fills your coffers, they need to know if you’ll be able to pay back the money.
Providing proof of reliable income is an easy task if you receive regular payslips. However, it’s tricky if your income stream has dry spells or unpredictable dips. The lender might consider such inconsistencies as “high-risk,” so you’ll need to work harder to prove your creditworthiness.
To get your foot inside the finance provider’s door, you’ll likely need to line up the following documents:
- Recent bank statements or proof of income
- Financial statements
- Tax returns
- Proof of assets
The lender will also want to take a closer look at your credit profile. So, having an impeccable credit history acts as another selling point that weighs in your favour during your application review.
Can I get a personal loan for self-employed people?
Getting a personal loan when self-employed may be rife with challenges. But, it’s also not entirely impossible. Options that are on the table for you include:
Standard personal loans
A standard personal loan is either secured or unsecured. When it’s secured, the lender can help themselves to your car, property, or any of your pledged assets if you fail to repay. With unsecured personal loans, the lender won’t have the liberty of selling your assets to recoup losses, so they’ll charge higher rates.
Standard loans can also have a variable or a fixed rate. Variable rates never hold steady, but they change under the influence of the Reserve Bank cash rate. Fixed rates are proofed against market changes, which is convenient if you want a dependable budget. However, there won’t be any savings to speak of should the cash rate ever go down.
As we explore other types of self-employed loans, keep in mind they’re just a variation of standard personal loans. The only difference is they have a few extra ‘features’ to accommodate those who can’t meet regular requirements.
Specialist loans
Some Australian lenders specifically include self-employed people in their client base. While the product is tailored to your situation, you might still need to hand over a lot more paperwork during the loan application. A stellar credit score is also preferable to improve your chances of approval.
Low doc loans
Digging through several years’ worth of financial records can be a hassle. On top of that, finding the required documents is sometimes hit or miss. A low doc personal loan cuts out this work for you, although you pay more for the privilege of providing fewer documents.
Bad credit loans
When you’re worried that your poor credit score will take a toll on your chances of approval, you can apply for a bad credit secured personal loan. That means you’ll need to own a sufficiently high-value asset to use as collateral. The lender may also pile on the interest charges specifically to lower the risk of financial loss.
Joint application loans
If you need extra backup when applying for a personal loan, adding a co-borrower or guarantor helps. This person will be responsible for your debt if your business goes through some financial mishaps. Reducing the lender’s risk also introduces a favourable twist where you can potentially borrow more at a lower rate.
How do I compare self-employed loans?
Considering the following factors keeps you on your toes, so you can easily spot the right product for your budget and needs:
- Interest rate. There’s a good reason why the interest rate is usually first to catch your eye when comparing loans. It sets the course for how much you end up paying by the time you offload your debt. Therefore, a lower interest rate steers you in the right direction for more savings, all things being equal.
- Fees. Steep fees and charges can quickly undo any potential benefits of a low rate. Take note of all upfront and ongoing fees to avoid this. The comparison rate is a handy representation of the total costs involved since it stacks up the interest rate and all standard fees into one percentage.
- Repayments. You’ll need to choose an affordable repayment amount using our self-employed loan calculator. Lower repayments usually need a longer timeframe and can cost more in the long run. But, shorter terms and larger repayments allow you to pay off your debt more quickly and cheaply. An extra repayment feature with no added fees also works superbly in this regard.
- Credit approval. Check out lending criteria before you decide to apply for any loan. Ideally, you want to only apply for offers where you stand a fair chance. Unless the lender strictly carries out a ‘soft’ credit check, knocking on several doors at once can hurt your credit score.
- Unique benefits. Some lenders deposit the money within 48 hours. Others provide a sleek application process and great customer service that makes borrowing easier. Generally, you should look for lenders that make an effort to roll out the red carpet for clients.
Self-employed loans FAQ
How can I get a self-employed loan in Australia?
You can receive a self-employed loan by completing a quick and easy application process on your chosen lender’s website. After you compare self-employed loan lenders in our comparison table above, click ‘Go to Site.’ Besides documentation, you’ll need to provide basic personal, business, and contact details.
Are there any alternatives?
Yes, although like all credit options, these have their upsides and downsides. For instance, low-interest credit cards are a cheap alternative. However, the amount you can borrow is capped low. A business loan is tailored for business use, which means you might not be able to use it for personal purposes.
How soon can I get the funds?
Depending on the lender, your bank will reflect the cash deposit within 48 hours or a few days.
What can I use the funds for?
Common uses for a self-employed personal loan include:
- Renovating your house or business premise
- Paying your home loan deposit
- Buying equipment
- Making investments
- Debt consolidation
- Holiday and travel
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