Getting a personal loan can be incredibly important. Whether it's paying off other debts, making home or auto repairs, or dealing with a major, unexpected expense, being able to qualify for a personal loan can solve major problems.
Any loan application process will involve some red tape and paperwork, but for self-employed individuals, it can be more difficult. The good news is that nontraditional income doesn't have to stop you from getting a personal loan - you'll just have to be prepared for some additional legwork.
Like other types of loans, personal loan qualification is largely about proving your ability to repay, which means providing documentation about your income. If you're a standard W2 employee, this is relatively easy - but for people that work as freelancers, contractors, own small businesses, or have other types of 1099 employment, such documentation can be more difficult to get together.
Now, not all personal loans (or lenders) are the same. Your credit history and unique circumstances - as well as the products and policies of a given lender - will all play a factor in your ability to acquire a personal loan. For those with excellent credit scores, a lender may approve larger amounts or require less paperwork, simply because of a long history of timely payments.
Income documentation can come in the form of bank statements, tax returns, deposit receipts, profit and loss statements, and so on. Depending on your lender, you may be required to provide up to two years' worth of documents. In some circumstances, you can acquire a personal loan with no income documentation at all, but instead provide assets or property as collateral. Still other personal loans require no collateral and minimal documentation, but may have exorbitant interests rates or other unfavorable terms.
The best course of action is to gather as much income documentation as you can - even if you may not need it. You can begin the process on the right foot by over-preparing, and ensuring your ability to provide whatever documents your lender might require. Once you've gotten your financial information in order, begin reaching out to lenders to find the right loan for you. It's worth contacting multiple lenders, and don't make a hasty decision or take the first loan available. Instead, take your time to compare terms and rates, and think about your future to make sure you won't be paying excessive interest.
Being self-employed doesn't have to make getting a personal loan more difficult, especially if you know what to expect. Be diligent in getting your paperwork together, and you'll be far better positioned to get the loan you need!
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