How to Get a Loan if You are Self-Employed

If you are self-employed, it may be a little harder to qualify for a loan based on other borrowers who can easily furnish a W-2 form. Keep reading to find out how you can still qualify for a loan when you’re self-employed.

Check Your Credit Rating

Your credit history is probably one of the most important factors in qualifying you for a loan. Your credit score is used by lenders to gauge how and if you’ll be able to repay the loan. So if your credit isn’t that great, getting a loan could be extremely difficult – or if you do, you may be paying a great deal more in interest for the loan you’re seeking.

If your credit score isn’t in the higher 600s or above – your best bet may to be to wait before applying, and continue to build your score. You can increase your credit score by paying bills on time, rectify any past due payments, and keep all your lines of credit open.

Need to know your credit score? Visit https://www.annualcreditreport.com/index.action and be sure to check your credit report for errors too. Errors on your credit report can also affect your score, so you’ll want to make sure you review the report in detail to ensure all open lines of credit are truly yours, and that all charges and loan payments are legitimately yours.

Compile the Necessary Documents

Due to the fact that you are self-employed, more than likely your lender is going to ask you for more documents in order for you to qualify for a loan. Here are the most frequently asked for documents, that you’ll want to get organized for at least the last 2 years before you apply:

  • Bank statements
  • Profit and loss statements
  • Tax statements (Your 2 most recent tax returns, schedules and transcripts)
  • 1099 forms

Get Prequalified

Many lenders will prequalify you for a loan first before you actually need to apply. If this is an option you might be interested in, reach out to your lender and ask what might be needed in order to issue a prequalification (where you’d find out the amount you’d be approved for and the loan terms).

Decide About Applying

If you’re happy with your lender’s terms and rate, you’re now ready to apply for the loan. Or if you’ve been researching several different lenders to compare the loan rate that you’d be offered, decide which one you’d like to apply with.

Lenders will typically offer online applications, or you may be able to call and apply over the phone or in person. This is where all the documents from above will come in handy. You’ll be asked detailed questions about your business income and finances. Having everything ready to go in advance will streamline the process.

Await Loan Approval and Funding

Once your loan application is fully submitted and complete, your lender will review your documentation and let you know if you were approved for the loan. Once your loan is approved, the funds will be deposited into your account and you’ll be able to continue to improve your credit rating, finance a large purchase, or fund your business needs.

At First Financial, we understand that not every business is the same – therefore not every loan is going to be the same. We pride ourselves in personalized service and reasonable timelines, keeping your business in mind. Email us at business@firstffcu.com and we’ll be happy to provide you with more information on loans for your business. Or, if you’re self-employed and looking for a consumer loan for personal use – check out the Loan Source page on our website. We have various consumer loans too!

A First Financial membership is required to obtain a First Financial loan and is available to anyone who lives, works, worships, volunteers or attends school in Monmouth or Ocean Counties in New Jersey. See credit union for details. A $5 deposit in a base savings account is required for credit union membership prior to opening any other account/loan. Federally insured by NCUA.

Article Source: CUInsight.com