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The benefits of being self-employed are numerous. You are your own boss and are often solely in charge of how, when and where you work. It is no wonder then that increasing numbers of workers are choosing to follow their passion by becoming self-employed.
However, there are drawbacks in addition to bonuses. One such negative is having loan applications turned down on a regular basis. Many lenders still see the income of self-employed workers as too variable and risky for them to invest in.
The nature of being self-employed is often entrepreneurial, so what can be done when a personal loan is required? Furthermore, what if a boiler needs replacing? New carpets are required? Or any number of jobs around the house? Home improvement loans for self-employed workers can be difficult to come by.
Yet it is important to remember that being self-employed does not mean a personal loan is completely out of reach. And although it can be complicated, it is far from an impossibility. So, if you are self-employed and seeking a loan, there are things you can do to increase your chances of acceptance. Lenders’ concerns tend to centre on finances, namely income on a month-to-month basis. They, naturally, want to ascertain whether the borrower will be able to keep up with repayments. That is why it is essential that thorough and complete records of incomings, outgoings and tax returns are compiled and stored safely. When it comes to proving that your finances are as they say you are, well-ordered documentation is key.
It is advisable to keep everything, even if it seems insignificant. The more you have, the better prepared you will be – and hopefully the loan process will be a smoother process as a result. If prospective spending is included, be clear about whether the amounts stated are regular, intermittent or one-off payments, as potential lenders will be keen to know every detail of your expenditure.
Luckily, lenders are becoming more and more used to the nature of self-employed work and the support these individuals require. So, whether it is for university fees, new equipment for the business or home improvement loans for self-employed workers, solutions are available.
Great post, Pauline. 4 years ago, just after the big economic crash here, loans for the self-employed were nearly unobtainable. But like you said, things are loosening up now. But like you said, organized documents are crucial. They could mean the difference between a “yes” and a “no” at the bank.
There has been an explosion of self-employment in the UK but it is largely an illusion and just massages the employment figures up.
The facts are exactly as the banks suspect – being self-employed is a risk. Some do make it but others are really just saying they are working for themselves when they don’t want to admit they are retired or jobless.
You outline a major problem – that of getting credit. Useful information!
Entrepreneurs are getting more and more common these days, the economy forcing many people thinking outside the box, so I guess lenders are getting more ok with the thought of lending out money to self employed people.