Loan

Important Facts about Self-Employed Loans

Learn how to navigate the world of self-employment with the help of self-employed loans.

Being self-employed has its perks—you have control over your career, you determine your working hours and you have the freedom to pursue your passion without fear of being fired anytime. But, most people who are working for themselves have undocumented income. Unlike regular salaried individuals—you have no pay slips or employer’s certification that potential lenders can verify. You may also find it difficult to access loans from banks because of the required documents that may not be available to you.

Documentation requirements

Aside from legal age, and residency or citizenship requirements, most loans for self-employed require an active checking account under your name. You may also have to show your latest income tax returns, books to prove your income and other documents to prove your capability to repay the loan.

Most banks would reject applications of individuals without income proof, because traditional loans are granted on the basis of your income. But with the availability of loans for the self-employed, you can gain access to financing without the usually required proof of income. Requirements vary depending on whether you want start up business loans, tax debt relief, working capital loans or another type.

Types of borrowers

People who have no formal employment can borrow money, provided they qualify for the loans. Each lending institution has its own eligibility requirements and caters to certain types of borrowers. For example, ALC Commercial provides loans for the self-employed professionals and non-professionals, who wish to work on their own, pursue their passion and make money doing what they love the most. It provides various financing opportunities that can help you meet your living expenses as well as the costs associated in running your business.

What you do with your money is up to you—however, you would pay for it eventually. For example, the big spenders usually see themselves as having enough money to pay for their needs so they are not focused on the amount of debts they incur. There are also borrowers who spend too much on assets and items that they could have otherwise bought on a cheaper cost if they only waited for a little while before the prices go down. And finally, there are people who simply waste money to boost their self-esteem and relieve stress. While there is nothing wrong with having these types of borrowing habits if you can afford to do so; people who have no formal employment may find it beneficial to educate themselves about money so that they can use debt to their advantage and not the other way around.

Flexibility

Use the loans in any way you want to—whether it is for paying for your business expenses or buying a car. Since you may not have access to other types of loans because of your employment status, you can use this type of loan to finance home improvements, children’s education and even a holiday vacation. Since the loans are processed quickly, you can access the money as soon as possible and spend it as you wish.

Secured vs. Unsecured Self-Employment Loan

Like personal loans, you can choose the secured loan, with collateral or the unsecured option. Select a type of loan suitable to your needs without worrying too much about credit check or heavy documentation. For secured loans, simply provide a piece of property as your collateral. It can be a car, your house, or any valuable asset that the lender accepts. The interest rates are usually lower in secured loans than the unsecured type because of the lower risk that a loan with collateral poses to the lender. In case of default, the lender can go after your property and recover the principal amount of the loan you still owed. It also gives you peace of mind knowing that the moment your collateral has been foreclosed, your debts would have been considered as fully paid, if the price of your collateral covers the remaining balance.

One of the amazing features of the loan is its accessibility. You can simply fill up the application loan online and wait for the loan officer to get back to you. Afterwards, you can wait for the confirmation and the money will be made available to your account upon approval.

Low Interest Rates

Lenders shoulder higher risks of not being repaid when they lend money to self-employed people whose income is not usually stable. If you cannot provide papers to attest to your income’s stability through your current balance sheets and pertinent financial documents, you may either get rejected for a loan or pay very high interest rates.

Loan sharks may charge more than 200% of the regular interest rates on low doc loans if you cannot provide two to three years of income tax returns, payslip and other proof of income. While regular employees may only have to pay a little over 1-2% higher than the regular interests on banks, those with undocumented income may not have the same luck.

In case of financial emergencies, you can count on self-employed loans and enjoy its convenience, flexibility and affordability. But, remember that while it may seem as a perfect option for those without formal employment, it is still advisable to work only with reputable financing companies to avoid paying more than you can afford.