Min. credit score
Up to $50,000
Up to $250,000
6 - 144 months
6.34% – 35.89%
Up to $40,000
3 or 5 years
As low as 6.99% APR
2, 3, 4, 5, 6, and 7-year terms
3.99% - 35.99%
$600 to $100,000
24 to 60 months
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
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
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
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.
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.
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, 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.
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.