Best Personal Loans for Self-Employed Workers

When you need money, you need money, especially if you’re self-employed and have an irregular income. Finding the right online personal loan lender can help you secure financing quickly. Going the more traditional route (bank or credit union financing) can leave you waiting for weeks. Online lenders can often offer turnaround times of just 24 hours.

Our team of financial experts reviewed and ranked more than 30 online lenders to help you get funded. Here are the 7 best online lenders we found.

Best Self-Employed Loans of 2023 - Full Overview

How to Choose the Best Self-Employed Personal Loans? 

When choosing the right lender, there are a number of factors you want to look into. We considered the following when choosing the best personal loans for self-employed borrowers:

• Loan features - Of course, you’ll need to look at the loan terms, loan amounts, and any loan use limitations stated by the lender. There’s no use in applying through a company that requires you to at least take out $5,000 if you only need $1,000.
• Interest rates and fees - If you have a high interest rate, you’ll pay hundreds of extra dollars over the life of your loan. Consider your credit score and the type of rate it’ll earn you (the better your score, the lower your interest rate, typically). On top of the interest rate, make sure you understand any extra fees a lender charges, including origination fees or any early payoff fees.
• Application process - One of the biggest perks of online lenders is how easy they make the application process. With an online lender, your application should take 10 minutes at the most. Plus, some lenders will let you prequalify, which only requires a soft pull on your credit score.
• Qualification process - Most lenders will list their minimum requirements somewhere on their website. This can tell you if you should even bother applying. Look for any minimum credit score or income requirements. Additionally, find out if you can work with a co-signer if you can’t qualify on your own.
• Customer support - Consider accessibility to a live customer service rep, as well as other support options. Some people prefer to talk to a live rep while others prefer email or text support, so make sure your company of choice has your preferred method.
• Online user reviews - Reviews are easy to find, so Google any company before you officially decide to apply.
• Perks and bonuses - Select lenders offer extra perks or bonuses like looking past your first missed payment or a super-fast application process driven by AI.

Should you take out a loan when you’re self-employed?

Whether or not you should take out a personal loan as a self-employed individual depends entirely on why you need the funds. Even if you are a sole proprietor, using a personal loan for business purposes may not be the best option. You can get business loans specifically designed for funding business needs.

If, however, you need a loan to fund personal expenses or even very small business equipment needs, a personal loan might make sense. As with any loan, seriously consider if you need the money before taking on additional debt.

How to Get a Personal Loan When You’re Self-Employed

• Step One: Check Your Credit Score. Your interest rate is heavily dependent on your credit score. If you have poor credit, banks see you as more of a liability since you may have a history of poor borrowing in the past. This, in turn, means you won’t get the best interest rates.
• Step Two: Gather the Necessary Documents and Information. When taking out a loan, you’ll need to gather a few important documents so you can fill out the full application. You’ll want to consider having 1099s, bank statements, tax returns from the last few years, and any other documents that show your income.
• Step Three: Shop Around and Prequalify with Several Lenders. Some lenders are aggregators that can show you multiple rates from different providers, but it’s still worth getting quotes directly from a couple of lenders you’re really interested in. When looking around, make a quick list with the main features of each company (or check ours out above) and start narrowing down your choices from there.
• Step Four: Select the Lender that Best Meets Your Needs. Pick a lender that offers a mix of features you really appreciate. That could be a low interest rate and easy only application. Or, it could be the longest loan terms paired with 24/7 customer service.
• Step Five: Complete the Loan Application. Once you’ve found the best lender, your next step will be to fill out their full application. This is when all those documents you gathered before are going to come in handy. Typically, you’ll spend 5-10 minutes filling out this application and you’ll be presented with your final rate and terms.
• Step Six: Wait for Approval. How long it takes to hear about your approval will depend on the lender of your choice. Some provide instant approval or same-day approval while others take a few days to a few weeks. You’ll be told when you choose your terms how long the funding process will take. In general, online lenders will provide a faster turnaround than brick-and-mortar banks and credit unions.
• Step Seven: Receive Your Funds. Finally, you’ve made it to the best part: receiving your funds! You’ll get them deposited in your account in the time frame given by the lender and you can use them as you see fit. You can use personal loan funds for almost anything, with the exception of purchasing a home.

Self-Employed Loans: Tips for Getting Approved

Maintain a Good Credit Score

Most lenders make your credit score the number one factor behind your interest rate, so ensuring you have the best score possible can get you the best rates. Making any debt payments on time, taking out loans in responsible amounts, and using credit wisely are all ways to keep up your score.

Keep Detailed Financial Records

Keeping track of past tax returns, W-2s, and other financial records can help you when you need to apply for a loan. Since you’ll be asked a variety of questions when applying, having these forms at the ready will make the application process run a lot smoother.

Borrow Only What You Need

Since you’ll be paying interest on any money you borrow, you should avoid borrowing more than you know you’ll need. There’s no point in paying interest on money you’re not using.

Consider a Co-Signer

If you don’t have the credit to get a reasonable interest rate, you can consider asking a family member or a trusted friend to co-sign on your loan. Only do this if they have a better score than you. Additionally, they need to understand that co-signing means they’re taking responsibility for the loan in the event that you can’t make payments.

Personal Loan Alternatives for Self-Employed People

Home Equity Loans or HELOC

Home Equity Loans and HELOCs let you take advantage of your home’s equity and borrow against it. You can often borrow up to 85% of your home’s value and use it to make home improvements, pay down debt, or other financial needs.

The biggest con of these loans is that your home is used as collateral for the loan. In the event that you can’t make payments, the lender can seize your home to pay down your debt.

Secured Personal Loans

Secured personal loans also require some form of collateral like your car, for example. These loans tend to be better options for those with lower credit that can’t qualify for good rates on unsecured loans.

Credit Cards

While 0% APR credit cards can be used to pay off other debt or make larger purchases, those without 0% APRs will likely be paying much higher interest rates than those on personal loans. As long as you know you can pay off the credit card during the intro APR period (typically 18 months at most), these can be a good alternative.

Business Loans

Self-employed workers have business expenses they need to take care of. Business loans through the SBA or directly through lenders are good options when you need help with expenses related to your business. They often come with more reasonable requirements.

Payday Loans

Payday loans, while they are an alternative to personal loans, are never a good idea if they can be avoided. They’re designed to keep you in a cycle of debt by offering interest rates of 100%+ and short repayment periods. They often don’t have credit score minimums, which is what draws a lot of people to them, but stay away from this option if you can.

Conclusion

When it comes to securing personal loans when you’re self-employed, the process will be mostly the same as a W-2 employee. The only difference is you’ll need to be able to provide more proof of income. There are many lenders that can help you get the funding you need, when you need it. We’ve created our list of the best personal loans for self-employed people in the hopes that you’ll find a lender who can offer you the best rate possible.