Bad Credit Personal Loans: Even the Self-Employed Can Get Approved
It is now widely accepted that the chances of getting a personal loan with bad credit are less than when applying with an excellent credit score. It’s also well known that self-employed applicants have one or two more hurdles to clear before lenders are convinced to grant approval. But what about self-employed applicants with poor credit ratings?
Fortunately, it would be false to claim that self-employed applicants have no chance of getting a loan when they also have poor credit. In fact, just as employees can demonstrate their ability to pay, so can those who are their own bosses. Therefore, the task of securing self-employment loan approval is not impossible at all.
So what does it take to convince lenders that their investment is safe when making a personal loan to a bad credit self-employed borrower? Well, there are some aspects of the app that you should pay close attention to.
Criteria for the self-employed
The key issue for freelancers is being able to prove a reliable source of income. Proof of full-time employment is usually enough to assure lenders that income is reliable. But, when it comes to a self-employed applicant seeking a personal loan with bad credit, the required insurance is not the same.
That is why there are additional criteria that self-employed applicants must meet. Simply stating your current income is not enough, as a sudden downturn in the economy can have an immediate impact on that figure. So before granting approval for freelancers, lenders want to know how safe the business is.
As a result, it is necessary to provide tax returns and bank statements to confirm a regular income large enough to cover personal loan payments. However, even when proven to be in order, it may still be necessary to provide security.
Provide collateral or co-signer
There are two forms of security that lenders are happy to accept. The guarantee is the traditional one, where an item of value is offered against the amount of the loan. However, a self-employed applicant seeking a bad credit personal loan may not have an item valuable enough to meet the required loan size.
For example, to get a $10,000 loan, you need to provide $10,000 worth of collateral. This means that a family heirloom, jewelry, or even a car may need to be offered. These items can be lost if a payment is missed. If the required amount is $20,000, it may not be possible to obtain a guarantee.
Another option that may see a lender’s grant approval for the self-employed applicant is a co-signer. This is much more manageable because there is no need to offer any items of value. Instead, a person promises to cover the personal loan payments in case the borrower is unable to do so.
Loan Size Matters
As with all loans, the size of the amount requested has an impact on the chances of success. For the most part, a few thousand dollars won’t cause too much trouble, and providing proof of income is usually enough to secure a bad credit personal loan.
When the required sum is higher, even a letter from the CPA confirming your self-employment status will not suffice. This is where offering some form of security comes in handy, effectively ensuring approval for freelancers.
Still, there must be assurance that there is a means to repay the personal loan. Therefore, be prepared to provide all required documentation. Unfortunately, quick approval, especially for larger loans, is highly unlikely.
