A personal loan can be a great choice to consolidate debt or in case of emergency expenses; for instance, car repairs, home upgrades, or bills. However, if you are self-employed then it might go a bit tricky to obtain a personal loan for multiple factors. Such as inconsistent source of income or more. Nevertheless, a personal loan for self-employed is still a way possible to consider.
How Does a Personal Loan for Self-Employed Work?
Are you self-employed and short on cash? You might be qualified for borrowing options such as personal loans. A personal loan is one of the most popular ways to borrow a certain amount of money which you will have to pay back over a fixed time frame. People request these loans for several purposes such as an emergency or a sudden expense, or more.
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Potential borrowers are required to meet important requirements when applying for a personal loan as self-employed. When analyzing if a person is eligible for a loan, lenders look for reliability and consistency in income. Therefore, it might sometimes work against the potential self-employed whose source of income and revenue streams are often inconsistent and variable.
Personal Loan for Self-Employed – What’s The Eligibility Criteria?
Whether it is a home equity loan, payday loan, or a personal loan for the self-employed, there are always eligibility criteria that you must meet.
- The candidate must be of at least 22 to 25 years old.
- The business must be in operation for the last three years.
- The applicant should not be more than 65 years at the time of the maturity of the loan.
Personal Loan for Self-Employed and its Requirements
Requirements for a personal loan vary from lender to lender. However, there is a couple of consideration such as income and credit score that traditional financial institutions consider when reviewing a candidate.
Here’s what you must meet to improve the chances of qualifying.
- Income
In order to ensure that borrowers have actually the means to return a loan, traditional lenders mostly impose income requirements on them. The amount of minimum income requirement varies from lender to lender. However, many times some lenders don’t disclose the minimum income requirement to the borrowers.
In addition, proof of consistent income may include bank statements, tax returns, bank transactions or bank statements, or bank deposits. When applying for a personal loan as a self-employed individual make sure to keep all essential documents (as mentioned above) with you. - Credit Score and History
A credit score of an applicant plays a crucial role when applying for a personal loan. It is one of the most essential elements that lenders usually consider when analyzing a loan application. Credit score ranges vary from bank to bank. It is based on factors such as the amount of debt, payment history and length of credit history. Nonetheless, an applicant must have the least score of around 5oo to 600 to qualify. - Collateral
When applying for a secured personal loan for self-employed, applicants require to pledge collateral or valuable assets to lenders. If a person wants to get a loan for a vehicle or home, the collateral will usually be related to the primary aim of the loan. Nevertheless, there are other treasured assets as well such as real estate, investment accounts, coins and more that can be collateralized for a secured personal loan.
Documents Required for A Personal Loan for Self-Employed
Candidates are required to present a few essential documents when applying for a personal loan. A lender or the banks will ask you to submit a few documents to verify your identity, employment, source of income, your residence and more.
Beneath is the list of a few essential documents that you will have to provide to your lender:
1. Loan Application
Prospective borrowers will have to complete and submit a formal document considered as a loan application. Once they submit the application the further process then will begin. In a loan application, the potential borrower will need to provide basic information like the purpose of getting a loan, how much they want to borrow and more.
2. Proof of Identity
Typically, borrowers are asked to provide a minimum of two forms of government-verified identification. It is to prove that they are US citizens and 18 years old. A few acceptable identifications include:
- Passport
- Military ID
- Driver’s license
- Birth certificate
- State-issued identification
- Certificate of citizenship
3. Income Confirmation
The bank or a lender will ensure that the borrower can pay back the loan within a certain time frame. For this, potential borrowers are required to present their current earnings and employment history to the lender. Here’s what you need:
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- Returns
- Paystubs
- Bank statements
- Contact information of the employer
Top 3 Companies for Personal Loan for Self-Employed
Countless companies and traditional banks are providing personal loan services to aspiring individuals. Here are a few best companies for a personal loan for the self-employed.
1. Alliant Credit Union
It is highly effective for those who want a personal loan promptly. They offer personal loans on the very same day which range between $1,000 and $50,000.
2. SoFi
Social Finance offers personal loans of around $100,000 to potential and eligible borrowers. They don’t charge any additional fees for personal loans.
3. LightStream
It is one of the most popular digital consumer lending platforms offering personal loans for eligible candidates for up to 0,000. Borrowers can use this loan for any purpose they want.
Bottom Line
Potential and eligible candidates can borrow personal loans from a traditional bank, an online lender, or a credit union. However, borrowers must meet certain criteria set by lenders in general.
Although, a personal loan for self-employed might not work for everyone, however, it may make sense in certain situations. You may have an emergency or a sudden expense for which you need a loan. Nevertheless, when deciding on getting a loan, do analyze what amount of money you actually need and how are you going to return it to the lender.
