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?
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
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?
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.