Yes, you can get a personal loan if you’re self-employed, but you might have a more limited range of options to choose from. Several of the mainstream lenders with headline-grabbing rates are willing to lend to self-employed individuals, provided you meet their requirements for affordability and can show supporting documentation.
A number of specialist lenders have also focused their efforts on more niche areas of the market, such as sole traders and the self-employed, and these are worth keeping in mind if you’re looking to take out a loan.
Pretty much all lenders now offer an eligibility checker facility. You’ll need to provide enough info for the company to run a “soft” credit search – which won’t affect your credit score but allows the lender to tell you whether it’s worth applying. It’s when you actually apply that you normally consent to a “hard” credit check, which does impact your credit score (a little).
Using each lender’s eligibility checker takes time, but a good loan matching service can do most of the leg work for you. You’ll enter your details once, and it’ll run the checks with each lender in its panel in a matter of seconds to find out which would approve you and what rate they’d offer.Check your eligibility with popular lenders
Don’t just apply with the first lender you find, even if it’s with your existing bank. Always compare a range of personal loans to find the one that best suits your financial situation. There are also alternative types of credit, such as secured loans and credit cards, which could better meet your requirements.
Yes, it’s still possible to get a personal loan even if you’re self-employed and have poor credit history, but you could find that your options are quite limited. You’re also unlikely to be offered the most competitive rate and may not be able to borrow as much as someone with good credit.
As with any loan, you can use an eligibility checker, and this will give you a good idea of whether you’ll likely be approved for a personal loan.
Not necessarily – especially if you meet a lender’s criteria for having the supporting evidence and documentation needed for a standard personal loan and have financial records dating back at least 3 years. However, you may be offered a higher rate if your circumstances suggest you’re a high-risk borrower – particularly if you haven’t been trading for long.
As competition has grown, you may find personal loans for self-employed applicants are no more expensive than a standard bank loan. Just be sure to compare all the options available to you and the features of and conditions applying to your chosen product before you sign up with a particular lender. The APR that a lender offers you may differ from its advertised “Representative APR” and will be based on factors such as your credit score, income and expenditure.
If you don’t have the employment history or documented income to get an unsecured personal loan, you could consider a secured loan. This type of loan uses the equity in your house as security against the loan’s cost. Because it’s a lower risk for the lender, secured loans generally offer lower rates of interest than unsecured loans.
If you’re self-employed and work from a home that you own, a secured loan could be easier to get accepted for. But the downside is that if you can’t repay your loan, the lender has the right to repossess your property and sell it to recoup its money. So, secured loans should always be considered with care.
If you don’t meet the eligibility criteria for a secured or unsecured loan or can’t find the right loan to meet your needs, you still have a lot of other options available.
Depending on your credit rating and the purpose of the loan, you might find a suitable credit card for your needs. With a 0% purchase credit card, for example, you can make purchases and pay no interest for a set period. In the best cases, this can be as long as 21 months. However, you should avoid using your credit card for cash withdrawals, as these can be expensive.
Alternatively, a 0% money transfer credit card lets you transfer funds from the card to your bank account and again pay no interest for a set period. You will usually pay a transfer fee of around 4% of the amount you’re transferring. You can then use the funds for whatever you need them for and withdraw the cash with your debit card.
With both a 0% purchase and a 0% money transfer card, you need to set, and always stick to, a repayment schedule to make sure you repay the money before the 0% deal ends. If you don’t, you could find yourself paying a hefty amount of interest over a prolonged period.
Also, you usually need a good credit history to get accepted for the best deals. If you don’t have one, you could consider a credit builder credit card, which is designed for those with low credit scores to improve their score over time. These usually have lower credit limits and higher interest rates, so it’s important to pay off your balance in full each month.
With a guarantor loan, a third party (typically a family member or friend) commits to paying the loan off if you default on repayments. Your guarantor will need to have good credit (and ideally be a homeowner), and frustratingly, the interest rates on guarantor loans aren’t usually the most competitive (often around 40-50%).
If the loan is to fund the purchase of business equipment or materials (but not stock), you could use asset finance or invoice finance. With asset finance, a lender will loan you money against the value of goods used for your business that you own, such as buildings, vehicles, machinery or office equipment. With invoice finance, you’ll be advanced a loan against the money which is owed to your business and which has been detailed on outstanding invoices. However, both of these options are likely to be more expensive than a regular personal loan.
Also, a small number of innovative new lenders, such as Drafty, offer alternative takes on shorter-term borrowing for borrowers who struggle to get approved by more mainstream lenders. Drafty was primarily designed to help people avoid expensive unauthorised overdraft fees.
Your would-be lender will usually need to see some or all of the following:
Here’s a quick run-through of the types of loans you can consider if you’re self-employed:
If you’re self-employed and looking for a personal loan, you might feel daunted by eligibility requirements. But there’s a good chance you already have the evidence of income you need in the form of tax returns, accounts or bank statements. It’s also possible to get a quick decision, with some lenders able to process and approve your application in less than 48 hours. You’ll improve your chances of making a successful application if you know what your options are, how the application process works and what documents you’ll need as evidence to support your application.
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As a self employed person who let hi house for £625 pcm is it reasonable to ask to borrow approximately £13,000 over 7 years to replace wooden window and soffit/fascia in the rental property. LTV is approximately 50%. My income is circa £30000 pa including rental yield.
Hi Pat,
Thanks for getting in touch with finder. I hope all is well with you. :)
Basing on the numbers you gave, there’s a chance for you to get a personal loan. What you can do is directly get in touch with any of the lenders on this page. Click on the “Go to site” green button to be redirected to their website. From there, you can then check your eligibility and know their requirements.
I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.
Have a wonderful day!
Cheers,
Joshua