Personal loan tips for the self-employed
If you’re self-employed or run a small business, managing your finances effectively can help make applying for a personal loan smoother.
Because your income may vary from month to month, lenders might ask for some additional information when assessing your application.
This guide shares practical tips to help you prepare and improve your chances when applying for a personal loan.
Understanding your finances before you apply
If you're self-employed and have fluctuating income, or you’re reliant on different sources of revenue, it can help to do your research before applying for a personal loan. Look into what lenders may accept as alternative forms of income, including revenue from rent, shares and other investments.
It’s also important to be able to show proof of savings, as well as a positive credit history. Savings are generally categorised as either genuine or non-genuine.
Genuine savings are typically money you’ve built up yourself and kept in a savings account over time. Lenders often like to see a consistent savings history because it can demonstrate good financial habits. Typically, savings are considered genuine if they’ve been held in a bank account for at least six months.
To support your application, it’s important to be organised and keep your financial records accurate and up to date. Having important documents readily available can help make the application process easier and may reduce delays.
Keep documents available and up to date for at least the past six months. It’s also a good idea to make sure your tax returns are lodged, accurate and paid in full.
Plan for future lean periods
Many self-employed Australians experience busier and quieter periods throughout the year, which can sometimes affect cash flow and budgeting.
The unpredictable nature of self-employment means that downturns and lulls in income may occur, which can affect your ability to make loan repayments.
To help stay on track and avoid penalties, it could be useful to look for loan options that offer flexible repayments. This can give you the flexibility to make extra repayments when income is strong, and ease off during quieter periods.
The ability to draw on money already repaid can be valuable for self-employed borrowers if cash flow becomes tight and is a feature worth asking your lender about. Also, if your income levels are particularly unpredictable, it could be an option to consider a loan that allows repayment breaks during low-income periods.
What to look for in a lender
If you’re self-employed then it’s a good idea to look for lenders that offer flexibility, understand your circumstances, and are prepared for income that can vary over time. Things to look for in a lender might include:
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Prefer to talk it through? Call us on 1300 108 794.
FAQs about getting a personal loans for the self-employed
Yes. Because income may vary from month to month, lenders might ask for additional information when assessing a self-employed applicant.
Self-employed applicants may be able to use alternative income sources such as business income, rental income, shares and other investments, depending on what the lender accepts.
Genuine savings are funds built up over time and held in a savings account, typically for at least six months. Lenders often see this as a sign of consistent financial habits.
Applicants should keep financial records accurate and up to date, with documents available for at least the past six months. Tax returns should also be lodged, accurate and paid in full.
It can help to choose loan options with flexible repayments. This means you can make extra repayments when income is strong and ease off during quieter periods. Features like redraw or repayment breaks may also help.
Self-employed borrowers may benefit from lenders that accept different types of income evidence, offer flexible repayment options, provide fixed or variable interest rates, and support you throughout the application process.
Contributor | Vasè Marcevska, Head of Direct Sales – Mortgages and Personal Loans
Vasè has over 16 years of experience in the Banking and Finance sector, specifically within the Third Party and Consumer lending industry. Her expertise now focuses on enhancing our Customer program through a deep understanding of mortgage origination and service excellence across our Financial products.
Published by Pepper Money. Read our Editorial Policy to learn how we create and review content.
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