The Coronavirus pandemic brought about chaos in the global economy, to the extent that nations are still struggling to recover from the downward spiral, after more than a year. The pandemic has gravely affected the livelihood of many big and small business owners, as well as salaried employees.
As people cope with the aftermath of the pandemic, the government is urging banks to free up more credit to help the self-employed sustain their businesses. However, banks and lenders have restricted their lending criteria so as to minimize their risk proposition, making it tougher for the self-employed to access credit.
The credit score is one of the most salient factors in your loan application since it helps the lenders assess your repayment capability. Another key aspect is your income, which gives the lender an idea of your affordability. This gap is what holds back the self-employed, for most of them the monthly income is variable.
So how does one go about borrowing self-employed loans? Scroll down to learn more!
You can certainly apply for loans even if you’re a business owner. Although, the loan options available for the self-employed are limited. In such cases, you should focus on fulfilling the lender’s criteria to qualify for the loan.
Several lenders lend to freelancers and business owners seeking funds to bridge some financial gaps. So long as your credit history is strong, the lender may consider you even if you’re self-employed.
Your credit score gives the lender insight into your relationship with credit. A good credit score shows how responsible behaviour you’ve been with credit. Having a good credit history and a source of income can strengthen your application since these factors help the lender determine your creditworthiness and affordability.
With a weighty application, you are likely to qualify for a higher loan amount at competitive rates for a longer tenure. But, it is in your best interest to only borrow an amount that you can afford to repay. If you borrow based on your eligibility rather than your need, you may end up falling into a debt spiral.
Personal loans are not earmarked for a specific purpose. You can certainly apply for a personal loan despite being self-employed. Moreover, unsecured personal loans don’t require collateral security. A solid application helps you qualify for better rates.
Here are some loan options for you to consider if you’re self-employed:
Normally, FCA-authorized lenders would run a hard credit check on you when you apply for credit. If a lender agrees to lend you money without a credit check, there’s a high chance that they will offer you an excessive rate of interest. So, beware of such lenders.
A lender would generally require the following documents to assess your online loan application:
Getting a loan can be difficult if you’re self-employed, but if you work on your credit habits, you can increase your likelihood of qualifying for credit, even with scanty options. Remember to compare your options before making the final call.
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