How to get a Personal Loan for Self Employed individual & Employed
Consumers sometimes can get confused between various unsecured loans. As each loan can be different from customer to customer. For example, term and interest rate of a personal loan for salaried/employed person can be less than a self employed person.
Short term business loan same day funding for self employed visit here (bad credit ok, no docs, no collateral required).
When William heard that his colleague Andrew is looking for a personal loan, he recommended an online lender who offered him personal loan at quite a competitive rate. The process was hassle free and quick, and William was happily recommending that lender to all.
Two days later, Andrew walked up to William’s cabin, all annoyed. When asked, he said that the lender levied 18 % interest rate. William was surprised. When they made further inquiries, they came to know it all came down to credit score and past credit behavior.
Easy access and flexibility. These are the primary traits that entice cash crunched individuals to personal loans. It can be used for debt consolidation, home improvement, meet unexpected expenses like wedding or hospital expenses and many others.
You do not even have to confide in or convince the bank about why you need the loan. Unlike other loans (auto loan, home loan etc.), the money is directly deposited to your savings or checking account.
But people often forget that it is not free bucks and should be treated as such. Hence, review the situation, explore more options and then decide. Even if you finally opt for personal loan, you must not do anything that can impact your credit score negatively.
Three personal loan mistakes one must never do:
- Apply too many times at too many places:
Just because it is easy and can be done in minutes, doesn’t mean that you should click away online loan applications. Every inquiry you make and acceptance/rejection are recorded in the lender’s database and are sent to credit bureaus, who determine your credit score and hence creditworthiness.
- Disregarding credit score:
If you have decided to take out a personal loan, do take the effort to get your credit report. Banks and online lenders disregard most applications with fico score below 640. Though some online lending platform like personalloans.com are willing to offer personal loan at 580 score. However, your credit score can make or break you when it comes to unsecured loans because many online lenders follow a risk-based approval process, meaning the lesser your score is, higher the interest rate would be.
- Misrepresented or contradictory documentation AKA lying.
It is plain illegal to give false information about your income either you’re a self employed or employed to get a loan. Lenders have a their own team of highly qualified people working for them to verify and process an application.
Documents Required to get a Personal Loan for a Salaried Employee:
- Bank statements
- Income tax returns
- Address proof and proof of identity
- Employment verification.
Below are the 5 things for a self employed person to keep in mind while applying for a personal loan:
- Business/Profession type:
How successful is your business? A doctor who does independent practice and a qualified plumber running a small business are assessed differently by the lender. If your earning well is not enough, unless you show stability in your monthly income. Some business may be risky and some are dependent on seasonal market, which might find difficult to get approved.
- Experience in your business/Field:
It is important to show your experience in the field. This shows the lender that you have been in this business from several years. Doing business with lot of experience says your business is more reliable and trustworthy.
- Business Income:
You Personal loan amount depend on your business income. More the income more the loan eligibility. Lenders offer personal loan only if your business is making profit. They do know your income varies compare to salaried person, sales and revenues. At the end, your repayment capacity is the only concern for the lender and that you can show/prove through income documents.
- Income tax returns:
Many individual self employed take the income tax process lightly as they don’t have HRs running behind them and reminding every now and then. If you not paid your income tax properly then it can be disadvantageous when applying for a personal loan or business loan. Banks and online lenders give more importance for income tax returns.
Both secured and unsecured loan required income tax returns from the last 1 years. Not just in your company name, but in your name too.
5. Business related documents:
- Bank statements both personal and business.
- Profit and loss statement
- Personal and business tax returns
- Personal credit score
- Time in business, commercial lease, and business licenses.
- Address proof
- Proof of identity (Driver’s license)
Instant Personal Loans for both Self Employed Person and Salaried Employee:
- Loan ranges from $1000 to $35,000
- APR: 6% to 36%
- Bad Credit OK
- Loan term: 3 months to 72 months
- Online Loan application takes 10 minutes to complete.
Submit your online loan request below:
Personal Loans for Self Employed or Employed:
Getting a Personal loan is a bit tedious task, unless you have average to excellent credit score and permanent source of income. Else, you have to find collateral based personal loan or secured loans. Apart from lengthy paper works, the waiting period is too long.
Personal loans for self employed or employed made easy at online lending such as peer to peer loans. If you have a good credit and income then no collateral is required. Instant Personal loan approval and quick funding is guaranteed.
For self employed or employed there is always a need for personal loan to improve their business or for personal purpose. In that case, you cannot depend on banks or other financial institutions who often need collateral to back your personal loan.
Where to Get a Personal loan?
Search online or visit your bank and apply ! is that simple.? yes, only if you can show proof of income, debt to income is well balanced.
Less paper work and quick funding is guaranteed. Keep Debt to income ratio in mind. If you have DTI (debt to income) less then 40% to 45% then you have better chance of getting loan from online lenders.
Note: There is no personal loan prepayment penalty. If you can pay off your personal loan quickly then do so as there is no prepayment penalty.
How to get a Personal loan [Watch this P2P lending video]:
How to Get a Personal Loan
The number of people, particularly in America, wanting to obtain a personal loan to bridge some sort of money gap is increasing each year. This is also thanks to the decrease in interest rates over the past two years. However, acquiring a loan entails some preparation on your part.
If you look at the demand for unsecured loans through credit unions, for example, this was up 4 % at the end of 2016, compared to 2015, according to CUNA. This is mainly due to a decrease in interest rates. Where the average rate on personal loans has decrease by 9.37 % since 2013.
If you are looking for a feasible way to pay for improvements done to your home, medical treatment, or for your wedding, then a personal loan is the route to go. This can range anywhere between $500 and $35,000, and in most cases, collateral isn’t needed to cover them.
Read further to find out what you require to qualify for a personal loan and what other options are available to you.
Know about Personal Loans
Before actually filling in the application form and applying, its important for you to first know how a personal loan works. Firstly, there are two types of loans; secured and unsecured.
With a secured loan, you are usually given lower interest rates; however, you will be required to put something up as collateral. This means if you fail to pay the loan back, they will take your collateral to recover the costs.
Unsecured loans are completely the opposite. No collateral is required, but the interest rates will be a lot higher.
The other aspect that you may be wondering is what do you actually require to get a personal loan. The information that will be required of you will vary depending on the type of loan you want to apply for. However, all loans require your place of address, social security number, and date of birth.
Employment information will also be required, including proof of income to verify your earnings. Other sources of income will also have to be provided, for instance, alimony.
Based on the loan amount and type of loan, the lender may require additional information such as your tax information, as well as mortgage statements, proof of address, and bank statements.
Qualifying for a Personal Loan
Every year, more rules are put in place and it’s become increasingly difficult to qualify for a personal loan through your credit union or bank, particularly if you require a larger amount.
If you have a good credit history, you can qualify for a signature loan online between $1000 and $35000. They are also referred to as ‘’good character loans’’ as they don’t require any collateral. With these types of loans, the lender will look to see if you have a good credit record and verify your proof of income.
These loans will usually attract higher interest rates, because these loans aren’t backed up with anything, since no collateral is needed. Speak to your credit union or bank to see if they offer these types of loans, and what the process will be to apply for one.
If you require a larger loan, you will need to go through a more complicated process. You will be required to fill out an application form, and provide collateral. You will be required to choose something that has value. So if you fail to pay, it will be sold to pay off the loan.
A relatively high credit score is required above 600 if you want to apply for an unsecured personal loan. And sometimes you may not even be approved for as much as you wanted. If you are not sure what your credit score is, you can use services like Credit Karma, Transunion, and Credit Sesame to get an overall view of your credit history.
Here is a summary of what you will need to apply for a personal loan:
- Proof of income – You will need to provide min 3 most recent payslips. Or if you are self employed. you will be required to show your tax returns or financial statements.
- Bank statements –Recent bank statements from the last three months.
- Proof of address – You can take your utility bill or mortgage statements as proof.
- Personal information – You will need your social security number, date of birth, and tax information.
Alternate Options for Personal Loans
If you don’t have a good credit score or you think you won’t be able to acquire an affordable loan from a credit union or bank, don’t worry. There are other alternatives for personal loans. We will look at some of these options in more detail.
Normally you don’t think of credit cards as a loan. But actually, a credit card can be viewed as a personal loan. If you have a decent credit score, and you require a larger limit or you can apply for a new credit card. You can then draw on that for your personal use.
Credit cards do normally have higher interest rates, and if you carry a balance, you may end up paying quite a lot. To get an interest-free personal loan, try to apply for a new credit card which has an introductory period.
Peer to Peer (P2P) Lending
An increasingly popular alternative at the moment is P2P lending. Whether you’re paying for tuition fees, financing a business, or trying to buy a car, P2P lending is a great option. Your credit status will be verified and you will have to apply for the loan.
If you want to draw funding sources, you will require a business plan, detailing how the money will be spent. With P2P lending, you usually get competitive interest rates, and a decent story will help you acquire the funding you need.
Here are some reasons why you should consider P2P Lending:
- Lowest interest rates – Since a lot of P2P lenders operate through websites, they can offer you low interest rates. You can get a rate 5% lower than your credit rate. This could equal thousands of dollars in savings.
- Your rate doesn’t increase. The loans normally have a fixed rate, unlike your credit card. Even if you are slightly late with your payment, your rate will remain fixed.
- Loan application is quick and simple. It can be a long process to acquire a loan. However, a P2P loan is quick and easy. All you need to do is complete an online form, verify your identity, and if you are approved, the money is transferred to your account.
- No pre-payment penalty and low late fees. Compared to other options, P2P lending has low fees. If you are late with your loan payment, the late fee is usually around $15. Also, if you would like to pay off the loan early, that can be done for free. Always a good thing to avoid as much interest as you can.
Friends and Family
You can usually get the best loan terms if you know of a friend or relative that can help you out with a personal loan.
However, you need to make sure that you are in a position to repay the loan; you don’t want to be in a situation where you risk the relationship. Draw up a contract so that you are liable, and this also demonstrates how serious you are. Include the interest rate and loan term in the contract.
While acquiring a loan from family and friends is not recommend, sometimes it is the only option you have available to you.
Personal Loans for Bad Credit
You are viewed as a high-risk customer if you have a poor credit or no credit. It’s a known fact that until you reach a certain score, you won’t meet the traditional guidelines that banks follow. Your best option then would be to either go the P2P lending for bad credit or borrow from a relative or friend.
Final Thoughts on Personal Loans
If you need a personal loan, there are various alternatives to choose from. From credit cards, payday lenders, loans from family or friends, and peer to peer personal loans. Chances are you will get a loan through one of these channels. However, you may have to pay a lot to get it, depending on your situation.
Whichever method you decide to get a personal loan, you just need to make sure you track your finances appropriately. You can use various budgeting apps like Manilla or Mint. Both of these are able to sync to your financial accounts and it is convenient to use. You will be able to view all your bills and accounts in one place, which will ensure you don’t forget to pay your accounts and loans on time.
You don’t want to be in a situation where you need a personal loan and in the end, have to pay thousands in interest or late fees for not paying your loan on time.