Loans for the Self-Employed

Personal loans benefit self-employed borrowers in many ways. The right loan can fund start-up costs, pay office expenses, and help you expand your business. Self-employed loans can also cover unexpected bills, helping you get by until your next payday. But, applying for a loan without a W-2 can be tricky.

How can you prove to lenders that you can repay your debt when you don’t get a steady paycheck? Fortunately, in today's bustling gig economy, lenders understand the importance of offering loans for self-employed workers and small business owners. You just need to provide the necessary financial documents proving your income. Read on to learn how loans for self-employed individuals work and some types of loans that may be at your disposal.

Can I get a loan if I’m self-employed?

Being self-employed is commonplace nowadays. Self-employed career opportunities are everywhere, from freelance programmers and social media managers to pet sitters and food delivery drivers.

These "gig workers" enjoy flexible hours and typically earn what they might in full-time employment — if not more. Under the right circumstances, qualifying for a self-employed loan is straightforward.

Lenders consider your income, credit score, and payment history regardless of your employment status. If you can prove you have a relatively consistent income and don’t have trouble paying bills, you may qualify.

Is it more difficult to get a loan if I’m self-employed?

It’s not necessarily harder to qualify for self-employed loans. However, suppose you’re relatively new to self-employment. In that case, you probably don’t have the income history lenders look for when approving self-employed borrowers.

Lenders expect self-employed applicants to have fluctuations in income. What they look for is an upward trend of increasing income over time. Newer freelancers and gig workers simply can’t prove a steady income growth that would cover future loan payments. So, getting a loan can be much easier if you’re well established in self-employment and have the financial records to prove it.

How loans for self-employed individuals work

Since you won’t have any W-2 forms to show lenders, expect to answer questions about your business. You’ll also need to provide alternative financial documents such as tax returns and bank statements.

If your income alone isn’t enough, consider applying with a trusted cosigner. Since a cosigner is equally responsible for the debt, lenders are more likely to approve a loan cosigned by someone with good credit and a steady income.

Some lenders may ask you to offer collateral for a secured loan. Secured loans are backed by valuable property, such as a vehicle or certificate of deposit. This allows a lender to secure payment of the loan by taking possession of the collateral offered if you can’t repay the loan.

Types of loans for self-employed borrowers

There are several types of loans you may qualify for when you’re self-employed, including:

Payday loans

Also known as a cash advance, a payday loan is a short-term loan typically paid back on your next payday. Payday loans essentially give you early access to the money you’re owed from your employer. This could allow you to cover emergency expenses if you live paycheck to paycheck.

Installment loans

Consider an installment loan if you need to borrow a more considerable amount of money than you expect to earn by your next paycheck. Installment loans are ideal for covering unexpected, big-ticket items, such as a home repair, emergency medical bill, or auto repair.

Lenders consider your employment history, income, and current debts when deciding whether to approve you for an installment loan. You don’t even need good credit to qualify. Better yet, you can repay the loan in fixed monthly payments over an extended term.

Title loans

A title loan is an excellent loan for self-employed borrowers. Title loans allow you to borrow a specific amount based on your vehicle’s cash value. The lender inspects your vehicle in person and provides an estimate within minutes. In many cases, you leave the lender with cash in hand if you qualify.

Since your car is used as collateral, you don’t need good credit to qualify for a title loan. Depending on your state, however, you may need to provide proof of your average monthly income.

Lines of credit

A line of credit works a lot like a credit card. Once you open a line of credit, it stays open, allowing you to withdraw money from the available funds. In addition, you only pay interest on the amount you borrow, giving you more flexibility and control over your debt.

How to get a loan if you’re self-employed

So, how can you get a loan if you’re self-employed? Follow these steps:

Compare lenders and loan options

First, you’ll want to compare loan options. Review the types of loans, rates, and terms when shopping around.

Gather all necessary documents

Once you’ve decided on a lender, gather the documents they require for the loan application. Typically, you’ll need a government-issued ID, proof of income, and your checking account information. Some states also require your social security number and a voided personal check.

Showing proof of income when self-employed

Bank statements are the most efficient way to prove your self-employed income. Many lenders want to see at least three months of bank statements to get an accurate view of your most recent earnings.

Another option is using your tax returns as proof of income.

Fill out and submit an application

Once you have the necessary documents, it’s time to apply. You can do so either online or with the lender in person.

Wait for approval

Sit tight! The lender will likely reach a decision about your self-employed loan in moments if you’ve provided the necessary financial information.

How to get an Advance America loan if self-employed

Loans for self-employment are available if you know where to look.

Advance America offers a variety of loan options well suited to self-employed individuals, including payday loans, installment loans, title loans, and lines of credit. Apply online or in-person at your nearest Advance America location to see if you qualify.