Personal loans may be harder to obtain if you are self-employed, but they are not impossible to obtain if you work for yourself.
Personal loans are typically issued to people who have a job that pays them on a monthly basis, as opposed to self-employed people, who are thought to have an unclear source of income and offer a lower credit risk.
Personal loans are not difficult to obtain, but lenders may frequently require detailed documentation from you to show that you can repay the loan on a monthly basis. It makes no difference whether you earn more than your peers who perform conventional jobs.
To qualify for a personal loan as a self-employed individual in South Africa, you must be prepared to produce enough evidence and have the fortitude to wait for a lengthy investigation. Before you start, however, you must first discover whether institutions offer personal loans to self-employed individuals.
Getting a Personal Loan if you are self-employed
Banks have stringent standards for granting personal loan applications, therefore it’s realistic to think that they won’t make personal loans to self-employed people. Personal loan applications from self-employed people are not accepted by banks such as Nedbank and Capitec.
Banks such as African Bank and FNB, on the other hand, offer flexible personal loans to self employed persons. Because it is more difficult for them to obtain a loan from a bank, they frequently turn to other lending institutions.
You could also look at peer-to-peer lending networks. RainFin, for example, is an online platform that connects individual borrowers with lenders to improve the efficiency and comfort of application and transaction operations.
Your credit score will be checked once you sign up and create a profile on the platform. Lenders will then be able to see your funding requirements. All you have to do now is wait for someone to react to your request and lend you the money you need.
The technology significantly reduces the time it takes banks to examine candidates. Some loan offers may even have lower interest rates when compared to other lenders.
How to Get a self-employed loan in South Africa?
Like previously stated, various financial institutions provide personal loans to self-employed individuals. One must demonstrate trustworthiness and the ability to repay the loan on time. Anyone can apply for a simple loan program, which allows you to borrow a small amount of money to help you improve your credit score.
Also self employed individuals can apply for loans that do not require credit checks, although this loan has a higher interest rate than others, it can help you improve your credit score.
Loans for self-employed people are not any more expensive than loans for employees. It’s only that they’re more difficult to find due to the increased risk that lenders confront when dealing with self-employed people.
To apply for a personal loan, simply follow the same steps as if you were employed, and supply any additional evidence that your lender may require. Prepare proof of income, such as 6 months’ worth of bank statements, a copy of your identity book, and utility bills from the past three months, to go with your loan request form.
Lenders may apply the same level of scrutiny to self-employed applicants as they would to a blacklisted application. Given that you do not have a constant monthly income, this is okay.
Because you are self-employed, banks have a more difficult time determining whether or not you are in financial distress. They discover no proof that you will be able to make your monthly loan installments. Banks may investigate your financials deeper to see whether you are genuinely capable of repaying the loan, resulting in a longer evaluation time.
Self employed people might utilize bank statements to keep track of their monthly profits. Keep track of your money and make sure you’re working on numerous contracts with a range of clients to demonstrate that you have a consistent source of revenue if you own your own firm.
There are a few banks that will give you a personal loan if you are self-employed. You’ll almost probably have to look for other lenders who can offer you more agreeable and flexible terms. You should nevertheless analyze their qualifications because not all alternative and micro-lenders accept self-employed applicants’ personal loan applications.
If you are self-employed, it will be tough for you to secure a personal loan in South Africa. However, if you have a robust income statement and the patience to file all of the necessary papers, you will be able to secure lending.