Can you take out a personal loan when you are self-employed?

Self-employment has the perk of being your own boss, but it has its challenges too. For instance, it can be difficult to get personal loans approval from some lending institutions. However, it is not impossible to take out a personal loan when you are self-employed. Here is what you need to do:

Operate for at least a year

Unlike employed people who have to work for only three months, a self-employed individual has to be in business for a minimum of one year to qualify for a personal loan. A year is enough time for you to understand the repayments you can afford. The lender also has to know how your business works and get assurance that you can manage your finances well.

Make sure you have an ABN

Most lenders may require your Australian Business Number (ABN) to verify the existence of your business. They can also use it to check the financial stability of your business and increase your chances of getting a personal loan. Remember that you can apply for the ABN online and it is absolutely free of charge.

Keep debts at a minimum and save for a deposit

Lending institutions check your current debt to determine whether you can handle the loan. As much as some debt can be beneficial to your business, it should be kept at a minimum. Saving up for a deposit can also help you negotiate a better deal.

Keep your tax returns record

Keeping tax returns records is not only good practice for your business, but it can also give your lender confidence that you can repay your loan. As part of the application process, you may be required to submit tax returns for the years you have been operational.

Prepare your bank statements

A three-month bank statement of both your personal and business account may be required. This can give your lender an overview of your management skills. It may also help them determine the loan amount that you can comfortably afford.

As the number of self-employed individuals in Australia keeps increasing, there is hope that it will get easier to access personal loans. Still, a finance broker can negotiate for you to secure the lowest possible interest rate. Talk to Empowered Finance today for comprehensive financial advice