Loans for the self – employed – How to apply?

In today’s world, self-employment is hard to imagine without a loan. This is either required so that the bills are paid or larger purchases can be made. Banks have long been no problem when it comes to lending to the self-employed. They have recognized that the self-employed are very good customers and always handle their finances correctly. So it is not as difficult as many think to be able to apply for loans for the self-employed.

What security must be available?

What security must be available?

Anyone who can demonstrate a regular income as a self-employed person will have no problem with banks when it comes to requesting credit. Anyone who can demonstrate good creditworthiness receives the same conditions as an employee. Banks require proof of the profit determination, the latest account statements, operational documents and income tax notices. The business license is also important because the self-employed activity should have been carried out for at least three years.

If you don’t earn enough, you can hire a second borrower who can secure the loan contract with a fixed income. The second borrower can either be the business partner or your own spouse. Only a regular income is important for banks, not the relationship between the borrower and the second borrower.

Cost and duration of loans for self-employed

Cost and duration of loans for self-employed

Most banks give loans to the self-employed in the form of installment loans. As with all other loans, these have to be repaid in small installments each month. The amount of credit that a self-employed person can take up depends on their creditworthiness. The better the credit rating, the higher the credit. The amount is then between 5,000 and 50,000 USD.

The term is then between one and seven years. The shorter the term, the lower the interest. In addition, a self-employed person cannot know how long the business is going as well as it is at the moment, so that long-term planning is not possible. The default risk is rated higher than for an employee, so that higher interest rates must always be expected.

How can I apply for a loan?

How can I apply for a loan?

Loans for the self-employed can be applied for from both the house and direct banks. Both have advantages that should be considered. The house bank knows all finances of the self-employed, so that they can quickly make a decision whether a loan is granted or not. A lot of interest can be saved with direct banks, since the processing fee that is part of the effective annual interest rate is often not applicable.

In addition, a direct bank also makes a decision quickly, so that the self-employed do not have to wait long for a decision. If you have submitted all the necessary documents, you can expect after a few days that the loan amount will be transferred to the account.

Non-bank loans immediately where they lend even without a register

More affordable and faster non-bank loan also without a register and proof of income

More affordable and faster non-bank loan also without a register and proof of income

Non-bank loans are relatively fast and easy to settle, much more affordable than bank loans, which are subject to much more detailed and deeper creditworthiness testing and proof of income. They may also be available to people with a record in the registry if the client has acceptable creditworthiness and the record is not serious. Especially for small loans, companies report that they tolerate registers. The registry is not the only parameter for approval. Another plus is the speed of processing and approval. Usually the client receives the money immediately after the loan approval and most of it to the account.

Money from private entities

Money from private entities

Non-bank loans are virtually everything except loans from banks, ie institutions with a banking license. All other credit products can therefore be classified as non-bank loans. It is obvious that this is a very broad term. The providers of these loans are well-established non-bank financial houses, specialized institutions or private investors. They all offer their free funds as loans on the market.

Advantages and disadvantages

Advantages and disadvantages

The general benefits are greater availability and a faster rate of money. Especially smaller amounts. The disadvantages vary depending on the providers, which are the whole spectrum and do not generally apply to all. In the non-banking field we find very serious providers, but we can also come across a company of inferior reputation.

  • Greater availability
  • Faster check-in
  • Wider range
  • Available in small amounts
  • Operational assistance before payday
  • First microloan free
  • They may be more expensive by type
  • I may be risky according to the provider
  • More confusing (for small businesses)

Risks of non-bank loans

The non-banking sector is thus very specific. You can find solid companies here, but also a non-solid company that only wants to capitalize on the ignorance of a few even desperate people and then no one will hear about it. The most frequent clients of non-banking lending institutions are people who usually need non-purpose funds in the short term. Another client can then be one that already has a record in the registry or with problematic income. All of these meet the non-banking sector in the form of various non-bank loans, which lend to almost everyone. An important parameter for approving a loan is assessing your ability to repay.

Problems may arise during repayment. In the past, many institutions have tried to include paragraphs in small letters in contracts, not to inform clients about rates and total costs, or to leave them uninformed. Beware of such companies. It is the law that the company or investor must do all these activities and sufficiently inform the client. Large established institutions have not had a problem with this for a long time, but small investors lending only a few tens of thousands of crowns may have completely different practices and contracts. With the new Consumer Credit Act, the situation has already improved.