What to expect from lenders when you work for yourself.
Many lenders ask to see your most recent pay stubs when you apply for a loan — something you don’t have if you’re self-employed. But there are a handful of lenders that are sympathetic to your situation.
The more you know about your options, along with how the process works and what documents you’ll need, the better your chances are of approval.
How can I get a personal loan if I’m self-employed?
You can apply for any standard personal loan as long as you can meet the eligibility requirements. If you can’t meet the requirements, you can also apply for a cosigner loan, which allows you to apply with another person who may have stronger qualifications.
Depending on your lender, you may be required to put up collateral as security for your loan.
8 providers that accept self-employed applicants
|Lender||Starting interest rate||Loan amounts||Available to self-employed applicants?||What documents are needed?|
|LendingClub||6.95%||$1,000 to $40,000||
|OneMain||16.05% to 35.99%*||1500 (subject to state minimum size restrictions) to $30,000||
|Even Financial||3.84%||$1,000 to $100,000||
|Prosper||6.95%||$2,000 to $40,000||
|LendingPoint||9.99%||$2,000 to $25,000||
|Avant||9.95%||$2,000 to $35,000||
|SoFi||5.99%||$5,000 to $100,000||
|Payoff||5.99%||$5,000 to $35,000||
*Annual percentage rate (APR) of 18.49% represents APR for top 10% of loans booked in January 2017 through March 2017. Maximum APR is 35.99%, subject to state restrictions. APRs are generally higher on loans not secured by a vehicle. Active duty military, their spouse or dependents covered under the Military Lending Act may not pledge any vehicle as collateral for a loan.
What documentation do I need to provide?
First, review the eligibility criteria of the lender to make sure that you’ll be able to provide the documents and show proof of a regular income — this is very important. Lenders usually require any or all of the following documents:
- Tax returns. Be prepared to show the last two years of your full personal and company tax returns. These will help prove any income you declare on your application.
- Financial statements. These may include any profit and loss statements to also support the income you declare.
- Proof of rental income. If you have any income from rental properties, you can declare this with real estate statements or copies of your executed lease agreements.
- Recent bank statements. This includes statements showing your savings and business transactions. It may also include statements showing any other outstanding loans or credit cards you have with other lenders.
- Company-specific information. If you own your own business, be prepared to provide information such as your company’s EIN, address, etc.
- Personal identification. Depending on the lender, this may be your driver’s license, passport or state ID. You’ll either need to copy your ID and fax it over to the lender or scan it and attach the digital file to your application.
Are loans for self-employed people more expensive that regular personal loans?
Not necessarily. The rates and terms your ultimately offered will depend on the lender you apply with, their underwriting criteria and your qualifications including credit score, income and debt-to-income ratio (DTI).
Lenders may view your application as more risky if your income fluctuates a lot and in turn offer you a loan at a higher interest rate to mitigate that risk. Keep in mind that if you don’t qualify on your own, you could apply for a cosigner loan with someone who’s willing to be responsible for the loan should you be unable to make payments.
How can I compare my options?
The following factors can be weighed when comparing the loans offered by different lenders to find the best deal for you:
- Interest rate. Make sure you know the difference between a fixed and variable interest rate. If you’re going with a variable interest rate, check that you will be able to make monthly repayments if the rate happens to go up at any time.
- Turnaround time. Depending on why you’re applying for the loan, you may need your money disbursed within a certain timeframe. Make sure that any lender you choose is able to provide your money within the time period you need.
- Eligibility. Before applying for any loan, check what the eligibility requirements are. Also, avoid applying for too many loans, as lenders will often consider you an irresponsible high-risk borrower if you make frequent applications.
- Application process. When comparing different lenders, be aware of the application process specific to each lender and what kinds of challenges or difficulties you may face when applying.
- Loan cost. Make sure you’re aware of all fees associated with each loan. This includes any one-time or ongoing fees.
- Collateral required. Always check to see if the loan you’re considering is secured or unsecured. In other words, check whether the lender requires you to put up any collateral as security for the loan. Security could include assets such as your home or car.
Frequently asked questions
You might as long as you have money coming in. Remember, income doesn’t necessarily have to come from a job — some lenders accept government benefits, pensions and any other regular money you have coming in as income.
You might also be able to qualify for a loan based on your future salary if you have a job offer.