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How to Improve Your Chances for a Loan When You’re Self-Employed

Life is never a straight path. No matter how financially prepared you are, there is a chance that you might need a loan to offset an emergency or even make a big purchase. This is a big reason why consumer debt in America — both personal loans and credit card debt — will reach $4 trillion by the end of 2018.

While having a good credit score will positively portray you as a creditworthy borrower in the eyes of potential lenders, being self-employed typically leaves you at a disadvantage. In some cases, self-employed individuals may have inconsistent income. Luckily, if you’re in this category, there are things you can do to improve your chances of landing a loan at a favorable rate.

Here’s all you need to know:

Understand Why You’re Disadvantaged

Everyone would love to have the best odds for online installment loans instant approval, but that’s not always the case. Lenders typically need to know that you can offset the loan they offer you with ease. This is an advantage for people who can deal with the loan on a pay-as-you-earn basis have.

On the flip side, the fact that you have an unstable income can portray you as a person who might find it tough to repay the loan. Luckily, lenders have diverse ways of looking into your income other than just concentrating on your salary.

You’ll Need Some Proof of Income

Income statements are usually required whether you’re self-employed or employed; the difference is the type of documents you need to produce. As a self-employed individual, most lenders will need you to provide them with tax returns that run at least two years back as proof of income.

As a result, being prepared with the relevant paperwork can be quite helpful to your chances of landing a favorable loan rate. This will also help you skip the part where the lenders ask for documentation to move on to the next stage of approval.

Proof from Your Longest Client Relationship May Help

Clients are the core of any business, and having worked with one for a long time could be helpful enough in solidifying your case in the eyes of your lender. An enduring client relationship usually means that you’ve exchanged multiple invoices over a long period of time. Additionally, you can also almost predict the amount of income you expect from them judging from the past patterns.

If possible, gather up invoices that run back into the days when you first started working together, and then present them to the lender. For situations where you have a particularly strong relationship, you should also ask your client if they would be willing to write a recommendation letter confirming their intention to continue working with you for the long-term. This will let the lender know that you have the means to offset the loan.

All of This Is for Your Own Good

Why do lenders have such a stringent loan application process? The answer is because it’s for your own good. While lenders set such rules to ensure that they can get their funds back, they also want to protect the borrowers from themselves.

Remember, missing a loan payment harms your credit score. Additionally, taking on a loan that is beyond your means makes keeping up with the payments tough and usually adversely affects your future financial options.


Securing a loan is all about portraying yourself as a low-risk borrower to the lenders. A history of financial responsibility through paying utility bills and having a stable income will usually suffice. Even though you might not need a loan right now, collecting the required proof-of-income data today can help make the loan application process easier in the future.

Photo Credits: cdn.pixabay.com

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