Self Employed: How to Ensure You Get Approved for Your Loan

self-employed-loandsGuest Post by Andrew

Self-employed individuals may now get approval to loans whenever they need one. If banks are usually stricter when dealing with self-employed clients, there are now numerous loan providers that are willing to provide needed amounts to such individuals. This is actually a growing part of the current lending market, which is a great advantage as many professionals now opt to work from home or to operate their own small businesses.

 

It should not surprise you that loans for self-employed individuals are often costlier compared to loans provided to employed people. Lenders are concerned about the risks they take from agreeing to lend money to clients who do not have a steady flow of income.

 

If you are self-employed, you may actually earn more than employees do, but businesses may be unpredictable; you may generate huge revenues this month but may experience a slump in the next.

 

It is time to look for various loan products from different loan providers. The market could be almost saturated with such loan providers, which would work more to your advantage. Your self-employment should not be a setback anymore if you need to obtain a loan. Here are several insights that could help you attain a loan approval as a self-employed individual.

 

Prepare all documentary requirements

First, you have to prepare and submit all required documents. Aside from completing a loan application form, you must obtain a checklist of all other documentary requirements to apply for and obtain the loan. You may have to furnish your tax documents or other proofs of your income generation.

 

If you choose to go for no documentation or low documentation loans, you may still have to prepare basic documentary requirements. However, such loans may be easier to obtain but may come with much higher fees and interest rates.

 

Get a co-borrower

It would really help if you have a guarantor or co-borrower for your self-employed loan. This would make the process faster as loan providers would look at the credit worthiness of your co-borrower. It is also better if the co-signer would be an employed individual, who has a steady flow of income. It may be hard to convince anyone to be your guarantor but you could start asking your spouse, parents, relatives, or friends for this favor so there would be no trust issues.

 

Be sure the co-borrower you choose would be willing to cooperate with you. Providing the required documents is usually a problem especially if the guarantor could hardly produce the documentary requirements, or if he/she is not willing to furnish the papers.

 

Become an attractive loan applicant

You could possibly make yourself an ideal and attractive loan applicant. You could start by having an excellent credit history. Loan providers always check borrowers’ credit scores to make sure you there is no record of delayed payments or defaults. This is a basic measure that serves as protection against risks.

 

You may also clear yourself of any debt. Lenders would be delighted to see that you do not have any outstanding debt during the loan application period. Offering a huge down payment could also be an option especially if you are applying for a car or home loan. Lastly, be willing to provide full documentations of your self-employment income, including profit/loss statements, tax returns for the previous years, and balance sheets.

 

Andrew has been writing on personal finance for the last 2 years, contributing to various blogs on short term loans and refinance solutions.

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Category: Personal Finance

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