Self Employed and Looking to get Pre-Approved?
Are you self-employed and looking for a loan?
Becoming your own boss is definitely taking off and appeals to many because of its flexibility and the chance to make a living doing what you really love. While there are many perks to working for yourself, there are also some downsides, such as the potential difficulty in getting a loan when you really need one.
When you’re self-employed and apply for a loan, there are times where you could be met by lenders wanting applicants with good, sturdy, full-time jobs.
The change in income from month to month make many lenders uneasy, as there is no guarantee that loan repayments can be made, and made on time. Banks are often the ones to point this out and as credit policies tighten across the board, this is only getting worse - it’s not good news.
If you’re self-employed, often your taxable income is less than your ‘real’ income. Items are claimed on tax if they help you earn your keep, such as car expenses, utility bills or good old stationary. Everyone is happy when they’ve claimed a bunch of stuff at tax time, but for someone who is self-employed, this means their income is less. This raises a red flag for lenders and they start to question how a loan could be repaid.
But there is hope. There are lenders out there that cater to self-employed people wanting a loan. You just need to know where to look. That’s where I come in. I know which ones will give you a leg up, and which are more understanding of your situation.
What do you need to apply for a loan?
To apply for a loan, you need your last two years’ worth of financial statements, income tax returns and up-to-date notices of assessment. As the name implies, low doc loans require fewer docs when applying and can be a great option. Often needed is a year’s worth of statements which include evidence of a self-employed applicants income and expenses. Some lenders will then use 40% of your turnover as income, which could increase your chances of getting a loan. I can tap into the lenders from our panel that do this.
If you’ve been self-employed for less than two years, you can still get a home loan, but it’s trickier. Most lenders will want proof you have more than two years’ experience in your industry. For example, if you were a self-employed carpenter you will need to have been a carpenter for that time. Loan hack: If you’re leaving a salaried role, start thinking ahead and keep old payslips and exit with a reference.
Something to note is that car loans are much easier to secure, because the credit scoring process isn’t so tough! But banks and lenders will still have a good look at your financials.
Self-employed finance can be challenging terrain to navigate, so you need a solid adviser on your side. One who knows their stuff and which lenders have favorable criteria for you. If you have questions about qualifying for a home loan, or any other loan, call me. I fit the job description and with my panel of 20+ lenders to tap into, I can help find a highly competitive loan to meet your needs and circumstances.