I’m self-employed, can I use an unsecured loan?

Last post: Mar 26, 2018

If you're self-employed, you may have found accessing certain financial services to be a bit of an uphill battle in the past. Here we explain why and offer some information about accessing flexible finance when you work for yourself.

If you're self-employed, you may already have realised that there are lots of small inconveniences involved in working for yourself. Many of these irritating issues probably didn't even cross your mind when you gleefully decided quit traditional employment.

In most cases these small, unexpected issues surround money. Particularly proving you have it. Whether you're demonstrating to a lettings agency that you can afford your rent, or trying to persuade a bank to lend you money, chances are you'll be facing a proper faff.

That's because virtually every business is wary of consumers who can't prove their income via an official employer.

Why do businesses care if you're self-employed?

It makes sense, when you think about it. Businesses want to ensure that any service they extend to a customer will be paid for. Usually this means checking that a prospective customer has a steady source of income which will cover upcoming costs. If you don't have a traditional employer, this can make accessing a whole range of services, from housing and mortgages, to loans, very tricky indeed.

Tricky - but not impossible.

Accessing services when you're self-employed

Self-employed people need a roof over their heads just like everyone else, and sometimes they even need access to flexible financial products. In these cases self-employed individuals simply have to go the extra mile to prove their they have a steady source of income.

One relatively straightforward way to do this is to provide two to three years worth of self-assessment tax returns. These documents will show your income and how much you paid in tax, assuring businesses that your income is what you claim it to be. Another option is to provide a couple of years' worth of bank account statements that show consistent income and financial stability.

Hurdles for the newly self-employed

Neither of these options are foolproof, unfortunately. Especially if you haven't been self-employed for very long. If you're new to self-employment, you may need to make use of a guarantor to access financial services such as unsecured loans. Companies will usually want to see a minimum of two years' of tax returns before taking you on.

Unsecured loans for the self-employed

So can you access unsecured loans if you work for yourself? The short answer is yes. The longer answer is yes: if you have two to three years of tax accounts. If you don't have the paperwork and can't arrange for a guarantor, you may also want to consider looking into secured loans which make use of assets such as your property to help free up finance.

We help self-employed people hand-pick loans which suit their lifestyles. Contact our personal loan experts today.