Discover how to improve your chances
Can I get a loan if I'm self-employed?
Can I get a secured loan if I'm self-employed
Being your own boss has lots of perks but it can make getting credit harder sometimes. That doesn’t mean it’s not possible, though – so if you run your own business and want to borrow money, read our guide on what to know and how to improve your chances.
Can I get a loan being self-employed?
In short, yes you can!
Your options might be more limited in terms of loan types and lenders, and the application process may require a few extra documents. However, you can still find a loan if you have a good credit history or suitable collateral, plus the right paperwork and proof you can afford it.
Borrowing is a little harder if you’re self-employed as lenders are more cautious with people who have fluctuating income versus a guaranteed salary from an employer. That doesn’t mean that all 2.9 million self-employed people in the UK are treated the same, though.
It varies based on factors such as your credit rating, how long you’ve been self-employed and how easily you can prove your income.
What types of loans can I get if I'm self-employed?
There are four main forms of loans you can expect to be available to you in this position.
- Personal loan: A standard unsecured personal loan is an arrangement to borrow an amount of money and repay it over a set period with fixed monthly repayments.
- Secured loan: A secured loan works in a similar way but uses an asset such as your home to ‘secure’ (back up) the loan if you fail to keep up the repayments. They can be a good option if your credit history is mixed or poor, or if you haven’t been self-employed for long or can’t easily prove your income. Always think carefully before securing a loan against your home, though.
- Guarantor loan: These loans involve getting someone close to you with a good credit history to ‘guarantee’ them, meaning they’ll pick up the repayments if you can’t. They’re another option if you’re struggling to borrow money on your own but they can put extra pressure on your relationships.
- Business loan: If you plan to use your funds for business purposes, you can take out a business loan instead. These can be unsecured, secured or guarantor loans, with different options for sole traders, partnerships and limited companies.
How to apply for a loan being self-employed
The application process is similar regardless of whether you’re self-employed. Here are the key steps you’ll typically need to follow:
- Get your documents together: You’ll need to collect various bits of information about your identity and financial situation. Lenders need these to assess your eligibility and having the right information will improve your chances of approval. See the usual must-haves in the next section below.
- Check your eligibility: Lenders have different criteria. With us, you must be aged between 21 and 70 years old, a homeowner living in the UK, and able to afford the repayments from your regular income.
You can check your eligibility online without it affecting your credit score as we initially do what’s called a ‘soft’ credit check, which doesn’t show up on your report. It’s wise to check your eligibility before making full applications, as getting rejected could hurt your credit score and put off other lenders.
- Compare loans: Loans aren’t a case of ‘one size fits all’, so compare your options including loan types and term lengths. For example, we offer loan terms from three to 20 years. Longer terms give you smaller monthly repayments but mean you’ll pay more in interest overall, and vice versa. Our advisers can help you assess your options.
- Complete your application: With your documents ready, eligibility confirmed and ideal loan picked out, you’re ready to apply. You can do this online for convenience, though some banks may allow you to apply in person if you’d prefer to.
What documents do I need to apply for a loan when self-employed?
You’ll need various documents to confirm who you are and if you can afford a loan. Mark Campbell, Loan Manager at Evolution Money, advises:
“Requirements vary between lenders but, if you’re self-employed, you’ll usually need at least:
- Proof of identity: A valid form of ID, such as your passport or driving license.
- Proof of address: Recent utility or council tax bills will cover it, or bank statements.
- Tax returns: This is easy if you’ve completed tax returns while self-employed – just log into your HMRC account and download your SA302 calculation. This can show your earnings for the last four years or any individual tax year.
- Bank statements: These allow lenders like us to confirm your SA302 and get an idea of your overall financial situation from your regular income and outgoings. This includes income earned separately from your self-employment, plus other credit commitments.
- Business information: This typically includes confirmation of the status of your business – for example, if you’re a limited company or sole trader – plus details of anyone else with a financial interest in it.”
Will a loan cost me more if I'm self-employed?
Being self-employed doesn’t automatically mean you’ll get worse deals than everyone else. If you have a good credit record and show you can afford the loan, you should be offered the same deal as any applicant.
That said, lenders generally prefer it if you have a fairly consistent income, which isn’t always the case for self-employed people. If your income fluctuates a lot from one month to the next, you may have to pay higher rates to borrow money.
can I get a secured loan if I'm self-employed and have a poor credit rating?
A poor credit history gives lenders reason to view you as a higher risk, which means you may be charged higher interest rates or be offered less than you asked to borrow. This applies to anyone, regardless of your employment status. However, having a strong credit score is one way to reduce a lender’s concerns about a less consistent pattern of income.
In this case, choosing a secured loan and using your home as collateral could help you borrow at a cheaper rate. Richard Prescott, Loan Manager at Evolution Money, says:
“We understand that securing finance when you’re self-employed isn’t always easy. Our advisers will work with you to try and find a solution if you have a poor credit score linked to CCJs, defaults or late payments. We’ll also do our best to help if you’re on a debt management plan or have had an Individual Voluntary Arrangement (IVA) in the past.”
What can I use the money for?
You can use a secured self-employed loan for a whole range or reasons. Your lender will usually ask what it’s for when you apply. People use our loans for:
- Making home improvements, such as an extension or new kitchen or bathroom
- Buying a new vehicle to make your life easier, whether that’s a car or a motorbike
- Consolidating existing debts into one more manageable monthly repayment
How to apply for a self-employed secured loan with Evolution Money
We hope this guide has given you a good idea of whether you can get a loan if you’re self-employed. If you’re your own boss and think a secured loan could be a good option for you, check your eligibility with us today without impacting your credit score. We’ve helped over 30,000 customers find loans from £5,000 to £100,000, earning thousands of great reviews along the way.
For more handy guides on managing your money, visit our help hub.
Representative 22.93% APRC variable.
For a typical loan of £26,600 over 180 months with a variable interest rate of 19.56% per annum, your monthly repayments would be £484.00. This includes a Product Fee of £2,660.00 (10% of the loan amount) and a Lending Fee* of £763.00, bringing the total repayable amount to £87,030.00. Annual Interest Rates range between 11.7% to 46.5% (variable). Maximum 50.00% APRC. *Lending Fee varies by country: England & Wales £763, Scotland £1,051, Northern Ireland: £1,736.
Think carefully before securing debts against your home may be repossessed if you do not keep up repayments on your mortgage or any other loan secured against it. If you are thinking of consolidating existing borrowing, you should be aware that you may be extending the terms of the debt and increasing the total amount you repay.
