As you face different situations in your life, you may need to apply for a loan to cover some costs. For example, many people get loans for school, cars and homes. However, you may struggle to find self-employed loans if you don’t have a traditional job. If you need to qualify for a loan while self-employed, you should try out these seven ideas.
Increase Your Income
Many times, banks and lenders will deny people if they don’t make enough money to cover loans. After all, these establishments want to ensure you can cover the costs for the loan since they lose money if you can’t. Due to this, the lender needs some assurance from you.
If you increase the amount of money you earn, you can work towards a loan. It shows that you can make money and pay off the loan, but increasing your income isn’t easy. It will take extra work, and potentially extra hours, to accomplish, so keep this in mind as you strive to make more money.
Collect Your Documents
Even if you earn more money, that won’t matter to your lender if you can’t prove it. After all, they want to make sure you can pay back the loan, so you will need to submit some proof of your income to receive approval. This will include collecting various documents that will show the lender how much money you make.
The link above talks about how you should bring your 1099 form from the last two years, your federal tax returns and your bank statements. These documents will provide the proof you need to show lenders that you make enough money to pay them back. While these documents won’t give you a guaranteed qualification, they will increase your chances.
Improve Your Credit Score
Your credit score represents how well you pay off your debts. If you improve your credit score, you can show lenders that you consistently pay money you owe, so they don’t need to worry about you paying them back. However, you may not know how you can improve your credit score, so we want to talk about the easiest approach you can take.
If you get a credit card and use it regularly, you can improve your credit score. Credit cards are a form of debt, so as long as you pay your credit card bills before their due dates, you will build your credit score. If you don’t own a credit card, you should get one immediately and start using it.
Pay Off All Your Debts
Going off of your credit score, you should also pay off your debts. Depending on your situation, you may have previous debts that hold you back from getting another loan. For example, you may have gone to college, so you need to pay your student loans before applying for another one.
Debts can come in various forms, such as student loans, car loans, home loans and even your credit card bills. If you have previous debts you still need to pay off, lenders won’t want to give you a loan. You should prove to them you can pay off your other debts before you ask for more money.
Save Money for a Down Payment
At the end of the day, lenders want to make money and do what they can to minimize losses. Because of this, some lenders will allow you to make a down payment on a loan to ensure they get some money out of it. However, depending on the options available, you could make a large down payment at the start.
Ask the lender if he or she will allow you to make a down payment on the loan. By making this down payment, you show your confidence in paying off the loan while providing some initial compensation to the lender. Plus, it will lower your overall costs, so it’s a great option that can open some doors if you need a loan.
Work for Two Years
Getting self-employed loans can be difficult since you need to show lenders that you can make money and pay off your debts. This means you need to have some experience in your field to show that you can earn money. Due to this, you should hold off on getting a loan until you work for two years.
The more money you can earn during this time, the more likely you can get a loan. When you are self-employed, you need to show that you can make consistent money since some jobs may have dry spells or slow points. Work for two years and show what you made to increase your chances of getting a loan.
Find a Cosigner
If you can’t get a loan, you can always look for a cosigner to help you. A cosigner is a person that agrees to pay off your loan if you don’t pay for it yourself. If you go this route, you will need to find someone willing to join you since it puts a lot of risk on the cosigner.
However, you should realize that you run some risks when it comes to a cosigner. For example, you may ruin your relationship with that person if you don’t pay off the money, or if you don’t repay any debts to him or her. If possible, you should avoid using this option, but you have it available if you need to use it.
You may struggle to get a loan when you don’t have a traditional job, but you can work towards it. Whether you want a personal loan, a mortgage or anything else to cover an expense, make sure you keep at it and try out these ideas. Doing so will help you qualify for a loan, so you can get that money to meet your needs.