There are about 15 million Americans who are self-employed at the moment. And that number is expected to triple in the coming years.
There are many people choosing self-employment because of all the benefits that come along with it. When a person is self-employed, it gives them more control over their work. It also provides them with a certain sense of freedom that they don’t get when working full-time for a company.
There are a few drawbacks to being self-employed, though. Getting a personal loan for self-employed freelancers, for example, can be difficult to do when you work for yourself as opposed to working for an employer.
But it’s not impossible to get your hands on a personal loan when you’re self-employed. Here are the things that you’ll need to consider prior to applying for one.
How Much Money Do You Need—and What Is It for?
The first thing you’ll need to consider when you’re trying to take out a personal loan for self-employed freelancers is how much money you’ll need. You’ll also have to think about what you’re planning on using the loan for.
Are you taking out a small loan to pay off a bill—or a large loan to pay for a car? This could make a big difference in whether or not you get approved for it.
If you’re taking out a small loan from a lender, they might be willing to overlook the fact that you’re self-employed. The expectation will be that it won’t take that long to pay back the loan.
If, however, you’re taking out a loan that will take you several years to pay back, a lender might be a little bit apprehensive about giving it to you. They might be nervous about what will happen if you struggle to turn a steady profit with self-employment.
With these things in mind, you should crunch the numbers to see how much money you need and decide how you’re going to spend it. When you’re intentional when applying for a loan, a lender is more likely to take your application seriously.
How Long Have You Been Self-Employed?
Did you just become self-employed within the last year? This could prove to be a hurdle for you when you go to apply for a personal loan for self-employed freelancers.
Most lenders are going to want to see pay stubs or some other proof that shows you’ve been generating a steady income for an extended period of time. This can make life difficult on a self-employed person applying for a loan.
There are some ways for you to get around this if you’ve been self-employed for longer than a year now. When you apply for one of the personal loans for the self-employed, you can use your income tax returns to show how much money you made freelancing during the previous year.
But this isn’t an option for those who have only been freelancers for a year or so. They have to try to scrounge together bank statements and paperwork to show their income. And even then, it’s not always enough to entice lenders to lend them money.
It’s why it’s a good idea for anyone who is thinking about going the self-employed route to apply for loans they might need before they do it. You’ll have a better chance of qualifying for one when you’re still on someone else’s payroll.
What Is Your Credit Score?
One of the other ways you might be able to get around a lack of employment history and pay stubs when applying for a personal loan for self-employed freelancers is with your credit score.
If you have an excellent credit score that is over 800, that will often qualify you for a personal loan, even if you can’t provide proof of income. Lenders will see that you’ve been responsible with money in the past and trust you with a loan.
That means that you should always check your credit score before applying for a personal loan for self-employed freelancers. You might not have anything to worry about if you have an excellent credit score or even just a very good or good credit score.
Are You Prepared to Take on a Higher Interest Rate?
Anytime a lender takes a chance on a self-employed person, they’re assuming at least a little bit of risk. There is a chance that their work might dry up and that they might not be able to stick to their original loan repayment terms.
Because of this, many lenders will offer higher interest rates to those who are self-employed than they would to those with full-time jobs. You’ll need to think about if this elevated interest rate will work for you based on your budget.
What Is Your Plan for Paying Your Loan Back?
At the end of the day, you should feel confident in your ability to pay back a personal loan for self-employed freelancers before you even consider taking one out.
If you’re not 100% confident that you can pay the loan back in accordance with the terms offered by a lender, you shouldn’t take the loan out. You could be playing with fire if you do.
Come up with a plan for paying a loan back ahead of time and be ready to talk to a lender about it. They’re more likely to extend a loan to you when they see that you have a plan in place and are committed to repaying your loan.
Apply for a Personal Loan for Self-Employed Freelancers Today
Self-employed freelancers take out loans for all kinds of things. From paying off personal bills to upgrading the equipment they use to do their jobs, there are many reasons for them to apply for a loan.
If you feel as though you could benefit from a personal loan for self-employed freelancers, put in an application today. But consider your answers to the questions listed here before you do. It’ll help you avoid any unexpected surprises later.
Check out our blog for more advice on applying for loans that could help you get the money you need.