How do self employed loans work?
Self employed loans work in a similar way to standard personal loans. You borrow a set amount of money and agree to repay it in monthly instalments over a fixed term.
Because your income is self generated, lenders will usually ask for additional documents such as tax returns, bank statements, or accounts to prove that you can afford the repayments.
Some loans may be unsecured, meaning they are based only on your income and credit history, while others may be secured against your property or another asset. The terms and interest rate offered will depend on your financial circumstances.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
Types of loans for self employed people
There are several loan options available if you are self employed including:
Personal loans are a common choice and allow you to borrow a fixed amount over a set period, usually at a fixed rate of interest.
Unsecured loans are similar, where no property is used as security, but these may be harder to get with irregular income.
Guarantor loans can be used if you have a poor credit history, where a friend or family member guarantees to make repayments if you cannot.
Secured loans, sometimes called homeowner loans, use your property or another asset as security and can allow you to borrow larger amounts, but they do come with higher risks if repayments are not maintained.
Example repayment for a self employed loan
To give a clear example, if you borrowed £10,000 over five years as a personal loan at a representative rate of 9% APR, your monthly repayments would be around £207.
Over the course of the loan you would repay about £12,420 in total, including both the original loan and the interest charged. The exact rate and repayment amount you are offered will depend on your credit record, income stability, and the lender you apply to.
What information do I need to provide to get a self employed loan?
Lenders will normally ask you to provide recent bank statements, proof of ID, and evidence of your self employed income. This could include tax returns such as SA302 forms, accounts prepared by an accountant, or business bank statements. The more consistent your income record, the easier it is to show affordability to a lender.
What is the eligibility criteria?
To apply for a self employed loan, most lenders will look for:
- You are aged 18 or over
- You live in the UK
- You have a steady and provable income from self employment
- You have an acceptable credit history, though some lenders accept bad credit
How do repayments work for self employed loans?
Repayments are normally made each month and include both the loan balance and the interest charged.
For personal loans the repayment amount stays the same each month, which makes budgeting easier.
Secured loans may sometimes come with longer terms and different repayment structures, but in all cases it is important to keep up with repayments to avoid late charges and damage to your credit record.
Do you offer self employed loans for bad credit?
Yes, at MustCompare we work with lenders who specialise in helping people with less than perfect credit. While you may not be offered the lowest interest rates, having bad credit does not mean you cannot get a loan.
By comparing across a wide panel of lenders, we can help you find the most suitable deal for your situation and guide you through the process with clear and simple advice.
Why use MustCompare for finding the best self employed loans?
At MustCompare we understand that being self employed comes with unique challenges, especially when it comes to borrowing.
That is why we work with a wide network of lenders across the UK to help you find the most suitable loan without the hassle of multiple applications.
We explain your options clearly, guide you through the paperwork, and make sure you understand the costs and repayment terms before you commit.
Whether you need to consolidate debts, cover personal expenses, or simply access funds for peace of mind, MustCompare is here to help you find the best loan for your circumstances.
FAQs
What is the maximum I can borrow with a loan for self employed people?
The amount you can borrow depends on your income and affordability. Some lenders may offer loans from £1,000 up to £50,000 or more, depending on whether the loan is secured or unsecured.
How long can I borrow for?
Loan terms vary but are usually between one and seven years for unsecured loans. Secured loans may be available over much longer terms, sometimes up to 25 years.
Is a self employed loan secured or unsecured?
It can be either. Many self employed loans are unsecured, but if you are borrowing a larger amount or have a poor credit history, you may be offered a secured loan instead.
How do you access the best rates?
You are more likely to access the best rates if you have a good credit score, stable and provable income, and if you are a homeowner with equity.
How soon can I receive funds?
Approval can be quick, with some personal loans releasing funds within 24 to 48 hours after approval. Secured loans may take longer because of the additional checks involved.
What happens if I do not repay?
If you miss repayments, your credit record may be damaged and you may face charges from the lender. If the loan is secured, your home or asset could be at risk, so it is important to borrow responsibly.
Do you carry out credit checks when applying for a self employed loan?
Yes, credit checks are normally part of the application process. However, there are lenders who specialise in helping those with poor credit histories.
Do I need a guarantor to get a loan for self employed people?
Not always. A guarantor is only needed if the lender requires extra security, which may be the case if you have bad credit or limited income history.
Is there a minimum time that I need to be self employed for to be eligible?
Many lenders prefer at least one to two years of self employment history, but some will accept less if you can show consistent income and affordability.
