Since the pandemic, the number of gig workers and other self-employed individuals has exploded. In fact, some reports estimate that approximately 36% of the US workforce earns all or most of their income through gig work or freelancing. But it can be a little harder to get a loan if you don’t fall into a traditional employment role.
There aren’t necessarily loans designed specifically for gig workers, but that’s really no surprise. After all, gig workers — or self-employed, freelancers or contract workers — are just workers who get paid a little differently and perhaps not as consistently as more traditional employees. But you still have nearly as many loan options as your average W-2 employee.
Getting a personal loan when you’re a gig worker might be a little more challenging, but it’s not impossible. You may just need to dig a little deeper to find lenders that accept alternative forms of income.
A personal loan could make sense if you need a larger sum and want to repay it over time. But you’ll need good credit for the most competitive rates and loan terms.
Installment loans — also known as short-term loans — are usually characterized by loan terms of 36 months or less or even just a few weeks or months. The best short-term loans have low APRs, a wide range of loan amounts and terms, and no fees, although it can be difficult to find one that checks all those boxes.
Some lenders, such Avant, welcome self-employed or gig workers and also accept people with credit scores as low as 580. But you’ll have to submit two years of tax returns, and it may charge administration fees.
If you only need a small amount of cash to make it your next payday, try downloading a cash advance app for gig workers. These apps don’t require credit checks, typically don’t charge interest or late fees and are relatively easy to qualify for. But you’ll still have to meet provider requirements, and advances could be too small, especially for first-time users.
Some cash advance apps also require you to receive income by direct deposit, which isn’t always an option for gig workers. If you’re in that boat, consider cash advance apps that don’t require direct deposit.
In an emergency, payday loans offer access to fast cash without much hassle. Gig workers shouldn’t have a problem qualifying as long as they have an active bank account and proof of income.
However, interest rates are super high, and payday loans present a very real risk of falling into a cycle of debt. This option should really only be considered as a last resort.
Some federal credit unions offer a far better alternative to payday loans with the aptly named payday alternative loans (PALs). These loans are usually capped at $1,000, offer competitive rates and often have more lenient requirements than other loan types. But gig workers — and others — normally have to be a credit union member for at least 30 days to qualify.
A number of lenders offer merchant cash advances (MCAs), and specific types of self-employed or gig workers may be able to qualify. MCAs are basically an advance on your future earnings that you’ll repay in daily or weekly installments.
But you really need to run a business — like retail — that has a large volume of credit card sales and can handle a rigorous payment structure. It’s also a very expensive form of financing, so you might want to explore other loan options first.
As mentioned, there aren’t specific types of loans for gig workers only. Instead, the best types of loans for gig workers are loans that have more flexible eligibility requirements. You can compare lenders by loan amount and more to see what loan options work best for your situation.
It’s important to be prepared and research your options before applying for a loan as a gig worker.
Lenders may require gig workers to submit a bit more documentation than they need for W-2 employees. Exact requirements vary by lender, but in general, have the following documentation available:
Consider the advantages and disadvantages of taking out a loan as a gig worker.
There are a few things you can do to improve your chances of loan approval when you’re a gig worker:
If you think you might not qualify for a loan as a gig worker, consider these alternatives:
Loans for gig workers can be more challenging than for more traditional employees, but it’s not impossible. You may just need to dig a little deeper to find lenders that accept income from self-employed or gig work and possibly supply additional documentation.
Consider personal loans, cash advance apps, installment loans, PALs or alternative forms of funding. Always compare lender rates, terms and fees to find the best deal.
It may be harder to prove income for gig workers, but unless it’s cash, there’s usually a paper trail. One of the more common ways to prove income when you’re a gig worker is by submitting 1099s. However, tax returns and bank statements are also suitable official forms for proof of income.
Payment methods for gig workers come in a variety of forms. The most common ways are by direct deposit, checks or even cash. Other clients may send money via PayPal or with prepaid debit cards or through apps such as Venmo or Zelle.
If you don’t have a way to verify your income — say you get paid in cash, for example — it can be much more difficult to get a loan. However, if you’ve claimed cash payments on your taxes, you may be able to submit your taxes for loan approval.
Also, many cash advance app providers need to see regular deposits to your account but don’t really care where the money comes from.
There are plenty of banking apps for gig workers or the self-employed, but check the features to make sure it has the functionality you need.
For example, the Found banking app is one possible option. It accepts multiple deposit methods — even cash — and supports multiple payment apps to accommodate different client payment methods. It also sends and accepts invoices, captures and saves receipts and tracks mileage and expenses.
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