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How to Get a Personal Loan If You Are Self-Employed – 2021 Guide

There are many benefits to being self-employed or a freelancer. It is one of those types of work that everyone envies. You get to choose your own working time, you get to do your tasks from home and have a lot more freedom than regular 9 to 5 employees. However, there are also a few disadvantages to this kind of lifestyle. But, it seems that a lot of people believe that one of those disadvantages is that you cannot get a personal loan. Well, that is not true and I am going to explain why.

It is true that being traditionally employed in a company is much simpler and familiar. All you need to do is to show your taxes as proof that you have some kind of source of income. But, if you are self-employed, you may not have any tax-related documents which may make things a bit more complicated for you.

But, there is no need for confusion because it is definitely possible to get a possible loan. You will just have to follow a few of these steps to ensure that you do everything right.

Find all the required documents

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As I mentioned previously, you probably will not have a tax form/document. But, there are other ways you can prove your source of income, you do not have to worry about that W2 form.

Assuming that you want your personal application to be accepted, you will need to get access to some other documentation that will verify your monthly income. One of the easiest ways should be through your bank. You can just print out all of the bank statements from your credit card and show all the inflow of cash. With this bank statement, you have proved that you are eligible for a personal loan and that you will be able to pay it back in the future.

If you are not getting your money directly to your bank account and you are getting it on online payment accounts such as PayPal or Payoneer, you can still use that as proof. I am sure that even those online services will provide you with a statement of all of your outflow and inflow of cash.

Keep in mind, whether you are self-employed or not, you still have to pay your taxes. Once you pay your taxes, you can use the tax return as proof of income.

Find the right lender

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Even if applying for a personal loan as a self-employed person seems a little bit more difficult, you still have a lot of choices when it comes to picking a lender. There are so many companies out there that will be willing to accept your application, no matter where you are employed. You are the customer and it is up to you to find the company that will satisfy your needs the best.

Do some research online and make sure you find a lender that provides low-interest rates on personal loans. There will be some lenders out there that will try to bait you into paying a much more expensive interest rate than you have to. For those that are looking to borrow money in Europe, it would be a good idea to look for lenders offering anywhere between 5% and 15% as suggested by Vaidoo. Anything above that is too much while anything below that is too good to be true.

It would also be a smart idea to figure out whether the lender will accept any alternative documents for verifying your income. This is an important side-note because there are some lenders out there that will only accept a regular tax statement.

Determine how much money you need

Source: accordfinancial.com

Before you make any kind of decision, I think that you should know exactly how much money you need. The sooner you decide, the faster you will go through this entire process of borrowing cash. Otherwise, you might end up hesitating which will cost you some valuable time.

Determine just exactly how much money you need and then start working with lenders.

Consider a collateral

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Sometimes, even with a great income, certain lenders might be hesitant to provide you with a personal loan. There might be several different reasons why they are hesitant, but whatever you do, you will not be able to change their minds.

If it comes to that, you might consider collateral. Of course, it is a little bit riskier, but if you are confident in the amount of money you make yearly/monthly, it may not be a bad idea.

With collateral, you will need to back up your loan with real estate, a car, or something else that is of similar worth. This makes things a little bit easier for both sides and increases your chances of approval considerably.

However, if you fail to pay back the debts, the lender may take your property, vehicle, or whatever you put as collateral.

Consider other alternatives

Source: opendoor.com

For those that are unable to get a personal loan no matter what, it might be time to start looking for some other alternatives. They might not be as good as a personal loan, but it is probably much better than nothing, right?

The simplest alternative would be to get a credit card. Of course, a credit card will not give you as much freedom with your cash, but you could still get access to €5000 or even €10,000. It all depends on the bank you have signed with.

If you want to get that kind of cash in hand, you could get a cash advance through your bank. Although, with a bank cash advancement, the interest rate or the APR might be a little bit higher.

As you can see, it is definitely possible to get a personal loan even if you are self-employed. In fact, there really is no disadvantage in being self-employed. You are in the same position as everyone else, you just have to supply the lender with the right documents.

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