Fund Ourselves

Can I get a loan if I am self-employed?

Can I get a loan if I am self-employed?

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Yes, you can get a loan if you are self-employed, but some lenders might be stricter with this and you may need to provide around 3 to 6 months of proof of income.
For the majority of UK lenders, you can always be considered and approved for a loan provided that you have a regular income, good credit status and can afford monthly repayments.
With over 5 million self-employed people in the UK, the nature of self-employed work means that your income may fluctuate and not always be certain. But provided that you can demonstrate stable and historical earnings, you can apply for a loan and get the funds you need, whether it is a short term loan, peer to peer loan or a mortgage.

Key points

Why are lenders stricter when it comes to self-employed borrowers?

UK banks and lenders generally take the view that people who are self-employed are more likely to experience fluctuations in their monthly income and salaries. When compared to someone who is full-time employed with a company, they should maintain the same salary (and bonuses) if they maintain the same employment.
But with self-employed people, their income and work may vary from month-to-month and this means that lenders are a little more cautious when lending them money for large amounts or long term periods.
Lenders also want to be cautious that someone is not unemployed, since anyone can set up a limited company and call themselves self-employed, despite not being in work or earning any income.
But that does not mean that all self-employed people are treated the same. After all, there is a difference between someone who has been self-employed for 3 months and someone who has been working for themselves for over 30 years.
For this reason, if you are self-employed and looking for a loan, you may need to provide extra information to the lender and provide a history of bank statements, trading history and proof of income in order to be approved for a loan.

What information do I need to provide for a loan if I am self-employed?

However, please note that this will vary between lenders. Every loan provider has different requirements and for products such as payday loans or short term loans, only a proof of income may be required. But if you are looking for a new mortgage or to remortgage, you may need to provide more substantial information.

What can I do if I am denied a loan because I am self-employed?

If you have been rejected for a loan because you are self-employed, you still have a number of options.
You may need to look at alternative loans which provide the lender with a bit more security. This could include using a guarantor or some form of collateral like a vehicle, office premises or property - and this could be used as security in order to borrow the money you need.
For larger loans and mortgages, you could speak to a broker who is likely to work with numerous banks, private firms and challenger banks and they are more likely to take a view on self-employed applicants. Plus, a broker works on a no-win, no fee basis, so is more likely to be proactive and help you get a loan offer.

Can I get a loan if I have just started a business?

Yes, there are loans available for people who have just started a business. You may wish to look at different startup schemes and Government grants for businesses. If you are looking to apply for a business loan, you may need to show trading accounts for around 12 to 24 months. Otherwise, you can always apply for a personal loan and if you need extra security, consider using a guarantor.

Why choose Fund Ourselves?

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Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk