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What are the eligibility requirements to get an unsecured personal loan when self-employed?

Personal loans for self-employed individuals can provide funding to make it easier to remain your own boss. However, you may discover that working alone presents several obstacles to approval.

First, bad credit histories are common for freelancers during the beginning years. Expenses sometimes overwhelm revenues, making it hard to stay current on obligations.

Also, proof of income is a common challenge for independent contractors during the startup phase. It takes time to make your venture profitable.

Fortunately, there are strategies to help you get the funding you need.

Loans for Self-Employed with Bad Credit

Personal loans for self-employed individuals with bad credit history also require something extra to convince the lender to approve a request for money. In the case of freelancers with poor credit scores, this can mean one of three things.

  1. Documenting sufficient income to support repayments
  2. Working with lenders who pull reports from alternative sources
  3. Keeping the principal amount small and repayment terms short

Request a personal loan here if all three of these criteria fit your situation.

No Credit Check

Personal loans for the self-employed with no credit check appeal to borrowers with bad credit history. However, companies that advertise no credit check still perform underwriting and turn away many prospective borrowers.

Lenders use alternative sources of financial records. Rather than pulling a copy of your mainstream consumer report (Equifax, Experian, or TransUnion), they look at files from other companies. The inquiry appears on the alternate report. However, the inquiry does not affect your traditional FICO score sourced from one of the big three bureaus.

Lenders put more weight on income and affordability. Therefore, you must show proof of income if you have bad credit and want to work with a lender touting no traditional credit check. Also, your earnings must be enough to support repayment relative to your other obligations.

Installment Loans

Self-employed people with bad credit frequently turn to installment loans. Installment contracts have fixed monthly payments and definite repayment terms. For example, mortgages, car loans and leases, and personal loans fit into this category.

Short-term small-dollar installment loans fit bad credit borrowers and minimize risks to lenders.

  • Shorter terms of 6 to 12 months minimize uncertainty
  • Smaller dollar amounts limit the potential losses to lenders

Installment loans with monthly payments make the contract more affordable. Spreading the payments over months instead of weeks makes the obligation easier to handle. You take many small bites instead of one large mouthful.

Payday Loans

Payday loans are the least favorable option for self-employed individuals with bad credit. Payday loans are cash advances that you must repay in full within two to four weeks.

Take out payday loans only during real emergencies such as car repair, apartment eviction, legal fees, medical bills, appliance breakdowns, etc.

Independent contractors should be aware of several caveats before tapping into this emergency funding source.

  • Origination fees add up quickly when you roll over payday loans. For example, a $15 fee is common for every $100 you borrow. You must repay $115 within two weeks. If you roll over the entire balance, you then owe $130 by the end of the 4 weeks, and so on.
  • You must still provide documentation showing regular checking account deposits. The payday company wants to see a regular source of funding to support repayment. A future-dated check has no value if the checking account shows little positive activity.

Loans for Self-Employed No Proof of Income

Personal loans for self-employed professionals with no proof of income require something extra to convince the lender to approve a request. Two years of signed tax returns are the standard requirement for brick and mortar banks.

However, online companies may show greater flexibility if you have high credit scores and can show evidence of positive cash flow for several months.

Request a personal loan here if you meet or exceed these parameters. Be prepared to complete the online form accurately.

  • Driver license number
  • Bank routing and account number

Good Credit Score

Having a very good or excellent credit score is the easiest way for the self-employed to qualify for a personal loan without proof of income or other financial documentation. A good credit score indicates that you are a responsible person who makes monthly payments on time and according to terms.

The higher your credit score is, the less important verification of earnings is to the lender. For example, borrowers with excellent scores might get away with simply stating income. Lenders might follow a chart similar to this when making underwriting decisions.

Credit RatingRangeDocumentation
Excellent800 – 850None
Very Good740 – 799Limited
Good670 – 739Modest
Fair580 – 699Extensive
Very Poor300 – 579Extensive

Bank Statements

Bank statements showing regular deposits and a reserve of cash are another way for self-employed professionals to qualify for a personal loan without proof of income. Remember, there is a difference between revenue and earnings.

  1. Revenue comes from the sale of goods and services
  2. Net income is your revenue minus your business expenses (profit)

Many freelancers do not show a profit right away. Or, they do not yet have a full year of profit to show on their Schedule C. Also, many brick and mortar banks require two years of tax returns.

Bank statements showing positive cash flow over the course of several months may suffice with select lenders. Online companies may accept these statements in lieu of more traditional forms of income verification such as tax returns – especially if you have a good to excellent credit score.

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