Compare personal loans for self-employed applicants

When you're self-employed, getting a personal loan might be harder – but it's perfectly possible, and you may not have to compromise on rate.

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In these cautious, post financial-crisis times, banks can be wary of lending to anyone without a solid financial track record. That can be especially true when a borrower is self-employed. But the number of self-employed people is on the up, and competing lenders want to tap into expanding markets such as this.

So although it can be harder to get a personal loan if you’re self-employed, it certainly isn’t impossible. Follow some basic steps, and you could not only get approved for a loan, but get the best possible rates for your circumstances. We’ll take a closer look at the available options, how to go about applying for a loan and what documents you’re likely to need to support your application.

How can I get a personal loan if I’m self-employed?

You’ll be glad to know that you do have options! Several of the mainstream lenders with headline-grabbing rates are willing to lend to self-employed individuals, provided you meet their requirements for affordability and can show supporting documentation. They might not give you their advertised “Representative APR” though… because they’re only obliged to give this to 51% of applicants. You may be offered a higher rate if your circumstances paint you like a more high-risk borrower – particularly if you haven’t been trading for long. There are also a number of specialist lenders who have focused their efforts on more niche areas of the market, such as sole traders and the self-employed.

  1. Don’t hit apply until you’ve checked your eligibility.

    Pretty much all lenders now offer an eligibility checker facility. You’ll need to provide enough info for the company to run a “soft” credit search – which won’t affect your credit score, but allows the lender to tell you whether or not it’s worth applying. It’s when you actually apply, that you normally consent to a “hard” credit check which does impact your credit score (a little).

  2. Even better, check your eligibility with multiple lenders in one go.

    Using each lender’s eligibility checker takes time, but a good loan matching service can do most of the leg work for you. You’ll enter your details once, and it’ll run the checks with each lender in its panel in a matter of seconds, to find out which would approve you and what rate they’d offer.

    Check your pre-approved rates
  3. Weigh up your options.

    There are alternative types of credit which could meet your requirements, such as certain types of credit card or even a guarantor loan. Learn more about alternatives.

There are plenty of lenders out there who will consider applications from self-employed individuals. Here are some examples with lending criteria:

Name Product Eligibility requirements Documentation required
  • You do not have any CCJs
  • You regularly get paid at least £800.00 per month
  • You have been living in the UK for at least 3 years
  • Address details for last three years
  • Tax returns (2 years' SA302 calculations)
  • Bank statements corroborating income declared.
  • Bank account details
Representative example: Borrow £7,500 over 3 years at a rate of 18.0% p.a. (fixed) with total fees of £440. Representative APR 22.9% and total payable £10,144.52 in monthly repayments of £281.79.
  • Aged between 21 and 70
  • UK resident for at least 3 years with a UK bank or building society account
  • Annual income of at least £12,000
  • Previously been employed for a minimum of two years
  • Good credit rating with no history of CCJ's or bankruptcy
  • Address details for last three years
  • Proof of annual income (e.g. tax return)
  • Bank account details
Representative example: Borrow £15,001.00 over 3 years at a rate of 3.1% p.a. (fixed). Representative APR 3.1% and total payable £15,718.32 in monthly repayments of £436.62.
  • Aged between 21 and 70
  • UK resident for at least 3 years with a UK bank or building society account
  • Annual income of at least £12,000
  • Previously been employed for a minimum of two years
  • A good credit rating with no history of CCJ's or bankruptcy
  • Address details for last three years
  • Employment details
  • Proof of annual income (e.g. tax return)
  • Bank account details
Representative example: Borrow £10,000.00 over 3 years at a rate of 3.1% p.a. (fixed). Representative APR 3.1% and total payable £10,478.16 in monthly repayments of £291.06.

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Late repayments can cause you serious money problems. See our debt help guides.

Will it cost me more because I’m self-employed?

Not necessarily – especially if you meet a lender’s criteria for having the supporting evidence and documentation needed for a standard personal loan, and you have financial records dating back for at least three years.

Remember that as competition has grown, as a self-employed applicant, you may find loans which are no more expensive than a standard bank loan. Just be sure to compare all the options available to you, and the features of and conditions applying to your chosen product before you sign up with a particular lender. The APR that a lender offers you may differ from its advertised “Representative APR”, and will be based on factors such as you credit score, income and expenditure.

Do I have alternative options?

Yes! However each comes with its own considerations and whether or not it ‘s a smart choice will depend on your individual circumstances.

Depending on your credit rating and the purpose of the loan, there may be a suitable credit card for your needs.

With a 0% purchase credit card you could make purchases and pay no interest for a set period which could be as long as 30 months, although expect to pay hefty fees to withdraw cash. With a 0% money transfer credit card you could transfer funds from the card to another account and again pay no interest for a set period. In these instances you need to set, and always stick to, a repayment schedule to make sure that you repay the money before the low rate period ends. If you don’t, you could find yourself paying a hefty amount of interest over a prolonged period. You should also weigh up any regular or one-off fees associated with the cards. For those with bad or limited credit histories, with a credit builder credit card, you start with a low credit limit but this can be reviewed in as little as four months.

With a guarantor loan, a third party (typically family member or friend) commits to paying the loan off in the event that you default on repayments. Your guarantor will need to have good credit (and ideally be a homeowner) and, frustratingly, the interest rates on guarantor loans tend not to be the most competitive (often around 40-50%).

If the loan is to fund the purchase of business equipment or materials (but not stock), you could use asset finance or invoice finance, whereby a lender will loan you money against the value of goods used for your business which you own, such as buildings, vehicles, machinery or office equipment, or will advance a loan against the money which is owed to your business and which has been detailed on outstanding invoices. Asset financing and invoice financing, however, are both likely to be more expensive than a regular personal loan.

There’s also a small number of innovative new lenders such as Tappily, that offer alternative takes on shorter-term borrowing, for borrowers that struggle to get approved by more mainstream lenders. Tappily was primarily designed to help people avoid expensive unauthorised overdraft fees.

What documentation do I need?

Your would-be lender will usually need to see some or all of the following:

  • Tax returns (SA302). Once you’ve submitted tax returns, you can simply log into your HMRC online account and download your SA302 calculation. You should be able to produce copies of your SA302 calculation for at least the last two years to help prove the income that you declare as part of your application.
  • Bank statements. These are likely to be requested so that the lender can corroborate the earnings shown in your SA302 calculation, and get a picture of your overall financial position (regular income and pattern of outgoings).
  • Confirmation of three years’ addresses. This is usually acceptable in the form of bank statements, or council tax or utility bills
  • Proof of any rental income. This should be declared and evidence provided, again through your bank statements or mortgage documents and statements, and you may need to produce any lease/tenancy agreements.
  • Details of any shareholdings and dividend payments.
  • Company/business information. Such as the status of the business (sole trader, partnership, limited company, etc), and details of anyone other than yourself with a financial interest in the business.

Bottom line

If you’re self-employed and looking for a personal loan, you might feel daunted by eligibility requirements. But there’s a good chance you already have the evidence of income that you need, in the form of tax returns, accounts or bank statements. It’s also possible to get a quick decision, with some lenders able to process and approve your application in less than 48 hours. You’ll improve your chances of making a successful application if you know what your options are, how the application process works and what documents you’ll need as evidence to support your application.

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2 Responses

  1. Default Gravatar
    PatNovember 11, 2018

    As a self employed person who let hi house for £625 pcm is it reasonable to ask to borrow approximately £13,000 over 7 years to replace wooden window and soffit/fascia in the rental property. LTV is approximately 50%. My income is circa £30000 pa including rental yield.

    • Avatarfinder Customer Care
      JoshuaNovember 25, 2018Staff

      Hi Pat,

      Thanks for getting in touch with finder. I hope all is well with you. :)

      Basing on the numbers you gave, there’s a chance for you to get a personal loan. What you can do is directly get in touch with any of the lenders on this page. Click on the “Go to site” green button to be redirected to their website. From there, you can then check your eligibility and know their requirements.

      I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.

      Have a wonderful day!

      Cheers,
      Joshua

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