Are you a freelancer in need of financial assistance but wondering if you’re eligible for a personal loan? The gig economy has made it possible for many people to work for themselves, but it can be challenging to get access to credit as a freelancer.
Self-employed individuals often wonder about their financial opportunities regarding loans and establishing credibility with financial institutions. Understandably, applying for personal loans requires proof of steady income.
This may disqualify freelancers if there are gaps or lapses between projects and partnerships. However, some lending companies may be a good fit for self-employed individuals seeking a personal loan and alternatives to consider when seeking personal loan approval. So, can freelancers get personal loan? Let’s find out.
Do Lenders Approve Freelancers for Personal Loans?
Most lending institutions have extensive processes when it comes to approving loan applications. The most common documentation to expect when applying is submitting proof of income through W-2 documents. For freelancers, this could cause difficulty or impact an application. However, freelancers can still be approved for loans based on their needs and with alternative documentation as proof of income.
What lenders look for when approving personal loans:
- Credit score
- Steady Income
- Tax documentation
- Employment history
- Other borrowing risk factors
If you’re self-employed, it’s best to research loan application requirements and loan agreement details. Your income and job opportunities may fluctuate in freelancing, so this factor could influence a borrower’s decision to approve a loan. Freelancers and self-employed business owners still have the chance to seek out loans from lenders that provide options to suit their needs.
3 Lenders With Loan Options for Self-employed Borrowers
While many companies offer personal loans, no two are alike. Factors that vary with each loan option include interest rate, term length, repayment options, and fees. For freelancers, choosing the best fit personal loan is essential to succeed over time. Here are three lending companies to research when considering a freelancer personal loan.
Avant is a credible lending company that offers up to $35,000 in personal loans. The term agreements can vary from two to five years or longer depending on repayment. With a fixed APR between 9.95% and 35.99%, you may find a reasonable personal loan option with Avant.
For freelancers, the required documentation includes tax documents from the two most recent years. This allows some flexibility in proving income, especially if you’re an established freelancer with a steady record of self-employment. A minimum credit score of 550 is also required in their loan application.
Discover is a well-known credit and loan lending company. Personal loan options range from $2,500 to $35,000, and repayment terms can vary from three to seven years. This option offers flexibility in repayment, which is an advantage for freelancers.
If you’re applying for a loan with Discover, you must submit tax returns and documentation from your two most recent years. A minimum credit score of 660 is required, and loan options include a fixed APR between 6.99% and 24.99%.
For freelancers needing a higher limit on personal loans, SoFi’s lending options may suit you. SoFi is a credible lending institution offering personal loans ranging from $5,000 to $100,000 with terms agreements between two to seven years.
For loan approvals, self-employed individuals generally must provide tax returns, bank statements, and documentation of consistent income. Loans can accompany a fixed APR from 8.99% to 23.43%, and credit score considerations vary.
Essential Elements That Could Boost Your Application
Most lenders have an established process of considering how much weight certain elements hold against your financial credibility. These measures are specified in terms of borrowing risk, where several factors are considered to determine if your economic history can give insight into repayment processes. Ultimately, proof of steady income is essential, but other factors could boost your loan approval statistics.
1. Credit Score
Whether on a personal or business level, a credit score speaks on payment history, amount of credit used, types of credit accounts, inquiries, and the length of time you’ve had credit to utilize. Your score helps lenders gain insight into your spending habits and payment history.
If your credit score is high, it may impact a personal loan application positively. However, a bad credit score doesn’t have to remain low. Working on building credit can help boost your loan applications. You may even discover pre-approved loan options when utilizing credit report websites such as Credit Karma, WalletHub, and Credit Sesame.
2. Bank Statements
Credit lenders often review your tax returns and documentation for income verification purposes. However, you may need a steady record of tax forms as a freelancer. Bank statements that show incoming funds and your financial status over time could help provide a better idea of where you stand financially. If you own a business, keeping your personal and business finances separate can make filing taxes and separating your records more accessible.
Whether you are a new freelancer or have been self-employed for many years, bank statements may be a permitted income verification form to credit lenders. For a personal loan, evaluating records of a personal bank account helps give insight into your spending habits, earnings, and monthly patterns and could establish the credibility you need for freelancer loan approval.
3. Consider a Co-signer
Co-signers add a boost to a loan application because it alleviates you from loan disapproval based on your earnings or credibility alone. In some cases, a lender may approve your loan on the condition that you have a co-signer with an established and trustworthy credit history. If you have a business partner, spouse, or someone who can co-sign, a lender may extend your credit because both persons are financially liable.
Other Options To Consider for Financial Support as a Freelancer
Freelancers enjoy the benefits of choosing their projects, terms, conditions, and flexibility. However, freelancing and seeking financial support from lenders to start a business or fund expenses could seem troublesome when you need to know what to consider. Accepting a personal loan may sometimes be the best choice, and other options, such as credit cards and secured loans, better fit freelancer finances.
Credit cards operate similarly to loans, except they differ in length and conditions. With revolving credit, you can purchase, pay the amount due, and retain a good credit score when paired with other factors. For more minor expenses and needs, you may consider a credit card with a low APR for freelancing needs.
Like personal loans, secured loans can help you attain the funds you need with a lower interest rate but can be tied to collateral items. If you default on the loan, collateral items can be seized in the collection process. Despite this, a secure loan with payments can help you boost your credit score, attain the funding needed, and be accepted without a co-signer.
Self-employed individuals are not omitted from personal loan benefits and possible opportunities. Regardless of your financial need as a freelancer, you can avail of different loan services or credit options to access the funds you need, whether you are an experienced freelancer or new to starting your own business. Researching freelancer-friendly loan options, maintaining good credit, and keeping accurate financial records can help you go a long way.
Freelancers on any freelance platform can certainly qualify for personal loans, but they may face some additional hurdles compared to traditional employees. It’s important to have a good credit score, stable income, and a solid business plan in order to increase your chances of approval.
Don’t be discouraged if you are initially turned down for a loan, as there may be other options available such as peer-to-peer lending or alternative lenders. As with any financial decision, it’s important to carefully consider your options and only take on debt that you can comfortably repay.
With careful planning and a bit of persistence, freelancers can successfully obtain personal loans to help them achieve their financial goals.