Personal loans for self-employed individuals can provide funding to make it easier to become and remain your own boss. However, as an independent operator you may discover that lenders will evaluate your application differently.
Self-employed incomes fluctuate more and are less reliable compared to those from an established employer. You will repay your obligation from future earnings, so expect the lender to look more closely at your application.
Lenders may discount your earnings. However, you may still be eligible based upon your documentation, risk rating, your profession, and the type of account you choose to open.
Personal Loan Eligibility for Self-Employed
Personal loan eligibility for self-employed individuals comes down to demonstrating a strong risk rating, a verifiable stream of income, and a manageable monthly debt burden. For many entrepreneurs and freelancers, proof of income is the biggest hurdle.
Proof of Income
Personal loans for the self-employed without financial documents such as proof of income may be possible. Lenders consider three criteria, your risk rating, income, and debt to income ratio.
Without proof of income, you cannot perform well on the last two criteria. Therefore, new solo workers must be able to show an excellent credit score. Many lenders will approve smaller amounts using the risk rating alone; when the applicant’s consumer report is pristine, and their credit score is above a specified threshold – perhaps 740 and higher.
Self-employed people with bad credit history face an uphill battle when trying to qualify for a personal loan. They start the process with one strike already against them. They must perform well on two other income related factors to counterbalance their poor risk rating.
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