Personal loans can be a great financing option for consolidating debt and paying for car repairs, renovations, and even travel expenses. But if you are self-employed, it can get trickier to secure a loan. This is because presenting proof of steady income and showing lenders you are a responsible borrower can be challenging, especially if your income is difficult to prove or irregular. Luckily, here are some steps you can take to have an easier time getting your loan application approved:
Prepare All Requirements
Due to a unique employment situation, self-employed individuals applying for personal loans usually have more requirements. It’s also helpful to prove you have consistent income by presenting at least two years’ worth of income documents to increase your chances of securing the loan.
To ensure a smooth application process, it’s wise to prepare all paperwork ahead of time. These installment loan requirements vary from one lender to another, but here are the general documents you have to gather early:
- Tax statements
- Bank statements
- Profit and loss statements
Improve Your Credit Score
Lenders will check your credit score to assess if they will approve your loan application. When applying, aim to have a score of at least 610. The higher your score, the better since it will yield the lowest interest rates. If your credit score is less than stellar, look for ways to increase it. One way to do this is to find errors in your credit report and correct them.
Choose the Right Lender
Don’t select the first offer you receive. Take your time instead to look for multiple lenders and compare their rates. Before you go for one with the lowest rate, don’t forget to consider their ratings, client testimonials, terms, and specific policies for self-employed individuals. Since self-employed individuals’ financial future can be unpredictable, look for lenders that offer flexibility in loan options.
Before submitting your loan application, it’s also important to check if they offer a pre-qualification process. Make sure the lenders perform a soft credit check to ensure it won’t affect your credit once you prequalify.
Apply and Wait for Approval
After choosing the right lender, apply for the loan in person or online. Prepare to show essential documents and answer questions about your finances and income. Expect also that the lender will do a hard credit check to verify details on your credit report.
After applying, wait for the lender’s decision if you qualify. Since you are self-employed, it might take more time to review your documents.
Repay Your Loan
Once your lender approves the loan, finalize all important documents and accept the terms. It’s also time to prepare to make payments. For your convenience, opt to enroll in automated payments. This way, you will build credit automatically and won’t have to worry about paying late fees or making loan payments.
Final Thoughts on Loans while Self-Employed
Being a self-employed loan applicant means you may have to jump through extra hoops to secure your loan. Loan lenders may also have different qualifying requirements, and personal loans come in different types, which can make the entire process complicated. Thankfully, this guide has the information you need to speed up your application process.
Regardless of your reason for applying for a personal loan, you can count on our ,loan agency in Nashville, TN to address your financial needs. At Mid-Town Finance, we offer personal loans to give you the funds you need. Contact us at 615-391-9378 for more information!