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Self Employed Loans

People who fit under the self-employed category include sole traders or proprietors who have their own business, partners, consultants or independent contractors. Self-employment is suitable for people who enjoy working at their own pace, setting up their own work schedule, determining their price, and possessing the flexibility to accept more attractive job offers. They can also choose to turn down work they don’t want to accept! 

People who are starting up often find it difficult to obtain financing since they don’t have any income to show the lender. The lender needs to be convinced that the borrower will make a profit and be able to repay the loan. Nowadays, more self-employed entrepreneurs are allowed to avail loans and mortgages. Due to advances in technology, the self-employed now have an equal chance of obtaining loans as individuals in conventional employment. This is mostly because of underwriting advances.  

Credit reference agencies and lenders can easily share consumer data and technology, and they have increased facilities for sanctioning self-employed loans. If self-employed individuals have a good reference from a credit reference agency, they may not have to prove profits and income. Competition is very high among lenders because so many people have plunged into the stream of self-employment. In fact, more than 1 out of every 12 people in the UK is currently self-employed. Therefore, by shopping around and preparing to do a little haggling, you can avail larger loans with lower interest. You can also seek a fresh loan or enhance an active loan. 

If your property is worth more than the mortgage, secured loans are available against the equity. Secured loans offer larger finance amounts and a longer period of repayment which can be up to approximately 25 years.  

Unsecured loans depend on your certified income, disposable income and your credit history. However with lenders galore, even those individuals with no proof of income can avail these loans. As a borrower, you are considered a “risk” so lenders may quote a high rate of interest. For example, a person with a regular year-round income with certification from an accountant will be offered a lower rate of interest than individuals who attract only seasonal pay and are self employed.

A certificate signed by an auditor or accountant stating business income received for a minimum of 2-3 years will be proof that the self-employed person is not considered a “risk” to the lender. The proof of income is an important document to prove your credit repayment capability. 

Self-certification refers to signing the certificate without providing documentation such as wage slips.  The rate of interest may be on the higher side, but is dependent on the individual. Another advantage is that lenders may offer you to pay more without penalty when the flow of income increases. They may also offer you a reprieve in repayment when your income flow is on the lower side.

In short, self-employed people have more and more options for availing self-employed loans in the UK. Online sources are readily available, and their terms and conditions have greatly improved due to the decreased cost of paperwork.

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