Personal Loan Tips for the Self-Employed
If you’re self-employed or a small business owner then it’s important you get all your financial ducks in a row, otherwise you may struggle to be approved for a personal loan.
The following guide provides some tips and tricks that could help you to get a personal loan when self-employed.
Be organised and informed about your finances before applying
If you're self-employed and have fluctuating income, or you’re reliant on different sources of revenue, it could be a good idea to do your research when applying for a personal loan. Have a look at what might be accepted by lenders as alternative forms of earnings, 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, both genuine and non-genuine, are deemed to be funds held in a bank account for over six months.
To support your application, it’s important to be organised and as diligent with your financial records as possible and to have these 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 accurate, up to date and paid in full.
Plan for future lean periods
The unpredictable nature of self-employment means that downturns and lulls in income may occur, this could impact your ability to make loan repayments.
To prevent falling behind on repayments and risking any penalties, it could be helpful to look for home loans that allow flexible repayments. This can help ensure that you have the flexibility to make extra repayments during periods when your income is high, and to compensate for the lean spells.
The ability to draw on money already repaid can be a valuable for self-employed borrowers and is a feature worth asking your lender about. Also, if your income levels are particularly precarious, it could be an option secure a loan that allows you to take repayment holidays when income is low.
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, are understanding about an individual’s circumstances and are sensitive to a borrower’s unpredictable financial future. Things to look for in a lender might include:
Whether the lender accepts alternative documentation for credit approval.
Flexibility regarding repayment periods, drawdowns, payment holidays and recognising alternative sources of income.
A lender that offers fixed or variable interest rates on their personal loans.
We’re here to help
Simplicity, flexibility and clarity are the essential ingredients for anyone who is self-employed and looking to apply for a personal loan. To get you started, find out what your rate and repayments might be before applying, (it won't affect your credit score).
Got a question and looking for more tips for getting personal loans while being self-employed? Call us on 1300 108 794
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Information provided is factual information only and is not intended to imply any recommendation about any financial product(s) or constitute tax advice. If you require financial or tax advice you should consult a licensed financial or tax adviser.
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