Best Personal Loans If You're Self-Employed

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Working for yourself definitely has its advantages. You're your own boss, and hypothetically, your earning potential is unlimited. But running your own business is tough. It hardly guarantees consistent income, and you might find yourself in a pinch one month when money is tight. You could take out a personal loan to ease the burden, but getting a loan when you’re self-employed is a bit tricky.

In this guide, we'll walk you through the ins and outs of getting a loan if you're self-employed, the inherent challenges of qualifying for one, and how to choose the best one for you.

Can You Get a Personal Loan If You're Self-Employed?

Yes, you can qualify for a personal loan if you work for yourself. A personal loan offers a lump sum up front that you can use for various purposes, from basic living expenses to home improvement and debt consolidation.

Every business owner has experienced a feast and famine cycle—the ups and downs that accompany inconsistent income. Still, lenders require proof of income to get approved for a loan. For self-employed borrowers, offering up employment pay stubs isn’t an option. The trick is to show you have a steady stream of income.

Here's the kicker: Depending on your situation, getting approved for a loan when you work for yourself might not be that hard. Some lenders may also draw from financial and credit criteria beyond your income to qualify your application, such as your debt load, payment history, education, credit score and cash flow.

See Which Loans You Qualify For

Ways You Can Use Your Loan

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One of the beautiful things about personal loans is their flexibility in what you can use them for. Here are some examples of ways you can use the funds:

Debt consolidation
Office remodeling projects
Emergency bills
Moving costs
Office equipment and supplies
Conference costs and membership fees
Travel expenses

Just be sure to check the fine print with any lender you're considering—not all lenders will let you use a personal loan to cover business expenses.

It's worth noting that lenders might allow you to use loan proceeds to start or grow your business. But other forms of business financing likely have lower interest rates and better terms, so be sure to shop around first.

Challenges of Getting a Loan When You're Self-Employed

The major stumbling block in securing financing for self-employed folks is that you might have trouble finding proof of steady income. Lenders want to make sure you have cash flow and financial wherewithal to stay on top of your loan payments.

To get around this potential challenge, aim to pay yourself a set amount each month. If your business is set up as an S-corp, you are on your own payroll as an employee. In turn, you'll be able to provide W-2 forms to the lender.

Even if you're not set up as an S-corp, you can show steady income by paying yourself a set monthly amount. For instance, wait to deposit checks on the first of the month. It might be easier said than done, but being methodical about depositing funds into your business checking account can help show that you have consistent income.

Best Personal Loans if You're Self-Employed

You can take out a loan if you're self-employed as long as you show proof of steady income. If you're using the funds for business-related expenses, you'll probably find better rates and options through other sources of business financing. But if you decide a personal loan is the right fit for you, here are some loans to consider:

Best for Limited Credit Profiles: Upstart
Best for Fast Funding: LendingPoint
Best for Competitive Interest Rates: LightStream
Best for Bad Credit: Upgrade
Best for Consolidating Credit Card Debt: Happy Money
Best for Small Borrowing Amounts: LendingClub

See Which Loans You Qualify For

_{Loan results will vary based on creditworthiness, loan purpose, loan amount, and other factors.}

Best for Limited Credit Profiles: Upstart

Upstart looks beyond traditional lending criteria like credit scores and leans on education and employment factors instead. As a self-employed person, you can provide tax returns and bank statements to prove income. Plus, there are no prepayment fees, and the funds can drop into your account within one business day. Just keep in mind, though, that you’ll have to pay your loan back within three to five years.

Best for Fast Funding: LendingPoint

If you're in a financial pinch and need funding quick, LendingPoint can provide funding into your account in as little as the next business day for qualified borrowers.

Best for Competitive Interest Rates: LightStream

If you have solid credit and at least several years of credit history, you'll be able to snag a low interest rate from LightStream, which is among the lowest across lenders. Note that the lowest rates are only available for borrowers with high credit scores, and certain amounts and term lengths. While the online lender does boast competitive rates, you won't be able to get prequalified on the website.

Best for Bad Credit: Upgrade

If your credit score is less-than-stellar, Upgrade's lenient minimum credit score requirement could help you land a loan. Rates are higher, and you’ll pay an origination fee, but you can also apply with a joint applicant.

Best for Consolidating Credit Card Debt: Happy Money

Happy Money offers debt consolidation specifically for high-interest credit cards. If you'd like to get a handle on your credit card debt so you can focus on growing your business, Happy Money could be a strong fit for your needs. By rolling your credit card balance into a single, new loan, you not only simplify payments, but you could potentially save in interest, lower your monthly payments or both.

Best for Small Borrowing Amounts: LendingClub

LendingClub offers low borrowing amounts, which can be a boon to freelancers and other self-employed workers who get paid inconsistently. Those looking to cover short-term expenses like a rent payment or a few months' worth of groceries might put a small loan to good use.

Tips to Improve Your Chances of Approval

Here are some other tips on how you can boost your odds of getting approved for a loan:

Be prepared to provide other financial documents. Instead of paychecks or W-2 forms, you can show tax documents or bank statements to prove income. It's a good idea to gather this beforehand.
Find lenders that look at other criteria. Again, lenders don't only look at your income. Some lenders might weigh more heavily on other factors, such as your debt load, education and credit score.
Maintain a strong credit score. The higher your credit score, the more attractive you'll be to lenders. If you're rebuilding your credit while in credit purgatory, stay on top of payments, maintain a mix of credit and keep an eye on the length of your credit lines.
Keep a low debt-to-income ratio. Lenders also consider your debt loan when reviewing your loan application. The higher your debt load, the greater the financial risk—in the eyes of the lender, that is.
Consider getting a co-signer. If your credit score isn't as high as you would like it to be, consider applying with a co-signer or co-borrower. You might have an easier time qualifying (with more favorable terms) if you link up with someone with a high credit score.

Personal Loans When You're Self-Employed: Pros and Cons

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Let's look at the advantages and disadvantages of taking out a personal loan when you work for yourself:

Pros

Don't need to provide collateral
Flexible use
Flexible repayment plan
Fast funding times

Cons

Can't always use them for business
Another debt obligation
Potentially high interest rates and fees

Pros

Don't need to provide collateral. Many personal loans are unsecured, meaning you don't have to provide an asset in the event you can’t keep up with payments.
Flexible use. You can use the funds for a variety of purposes—think debt consolidation, home improvement, living expenses or wedding costs. In some cases, you might be able to use a loan to grow your business (more on this below).
Flexible repayment plan. Some lenders are more flexible than others regarding payment plans, such as the due date and the length of the loan. This could help you juggle other financial obligations as you run your business.
Fast funding times. Depending on the lender, you can receive the cash within a few business days after approval. This can be a lifeline for emergency or sudden expenses. Along the same lines, you might be able to apply entirely online.

Cons

Can't always use them for business. Personal loans are intended for personal matters, and while some lenders allow you to use the funds to support your business, others don’t. If you need financing for your business, look elsewhere for higher borrowing limits and cheaper rates. For instance, an SBA 7(a) loan, a business line of credit, crowdfunding, a business credit car d, or friends and family might be smarter financial decisions.
Another debt obligation. If you're prone to gaps in cash flow and inconsistent income, adding another debt load to your money mix can be tough.
Higher interest rates and fees. While a personal loan can be quicker to obtain, it might come with higher rates than other lending alternatives. Plus, additional fees might apply, such as an origination fee, which can be anywhere from 1% to 10% of the loan, or a prepayment penalty if you pay off your loan early.

How to Qualify for a Loan When You're Self-Employed

Getting approved for a loan when you're self-employed really isn't that much different than if you had a 9-to-5. You'll need to provide basic personal and financial information, such as:

Birthdate
Social Security number
Contact information (home address, email, phone number)
Annual income
Sources of income
Monthly expenses
Debt load
Employment status and current employer
How much you'd like to borrow

Lenders typically ask for proof of income through W-2 forms or employment stubs. And as you might not have these readily available as a self-employed person, you can provide these forms of documentation instead:

Bank statements
1099 forms
Tax returns from the last two years

How to Choose a Personal Loan

Here are some quick tips to keep in mind when shopping around for a loan:

The rates and terms will have the biggest impact on the overall cost of the loan.
Research offers from several lenders and compare them.
Look for lenders who make the loan approval process easy. If you prefer to do as much as possible online, opt for lenders with online applications or mobile apps. If you’d rather discuss your options with a human, look for lenders with nationwide branch locations to apply in person.
Read the fine print for any added personal loan fees or terms that could increase your borrowing costs.

It's a good idea to prequalify with several lenders so you can compare rates and terms to find the loan with the right fit for you. Most lenders can do a soft credit pull when you prequalify, so your credit score won't get dinged.

Alternatives to a Personal Loan

If you've run the numbers and a personal loan isn't the right fit, there may be other financing options that make more sense. Here are a few to consider.

Business Credit Card

Those who need funds for business expenses in particular may want to research business credit cards. Many people can use a business credit card, including freelancers and small business owners. These cards often come with useful perks, too, like cash back and other benefits.

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Best Business Credit Cards

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0% APR Credit Card

A 0% APR credit card is a good choice for a lot of people looking to cover personal expenses because it offers a long interest-free time period. The gist is that you can charge your expenses and then will have a while, often 18-21 months, to pay back your bill before you get hit with any interest charges. The trick is to be sure you can pay back what you owe before that intro period kicks in, because if you don't, you'll typically have to pay a high interest rate.

Savings Account

Setting up a high-yield savings account for a specific goal can be helpful if you have time to build up the fund—and the best part is that those funds are yours, no interest owed. You'll actually earn a little more interest this way than with traditional savings accounts. If you know you can set aside a small amount each month, you can even put the whole process on autopilot by having funds transferred from your checking to savings on a regular schedule.

Grant Money

Grant funds aren't the right fit for everyone, and finding a grant can take a little legwork. But if you're looking for business funds, it might be worth researching local or federal grant options. A few types of grants you might find include:

Federal grants for small business owners
Startup grants
Funds for women- or minority-owned businesses
Grants for artists and other creatives

Grant applications can take a lot of work, but if grants fit your business model, they can be great because they don't need to be paid back (though you may owe taxes, depending on the situation.)

FAQs

Not necessarily. Some business owners might find it hard to show a steady proof of income, but several lenders lean more heavily on other criteria, such as your credit score, debt load and education.
Many people can. Some lenders extend loans to self-employed folks with not-so-great credit. That being said, be prepared to pay more in interest and fees.
Freelancers can qualify for a loan, but they must provide proof of steady income. Typically, they'll need to provide either the last two years of tax returns, bank statements or 1099 forms.
It largely depends on your financial situation and personal needs for the funds. Sometimes it makes more sense to use a loan for personal expenses, like home improvements or debt consolidation, but that's not always the case.

If you have larger startup costs, for example, and can qualify for a low interest rate, a loan could be a good choice. It's especially important to calculate how much you need to borrow and to shop around with lenders so you can figure out how much you'd need to pay each month and for how long to see if it's worth it. Also be sure to look at lenders' fees to see if that will cut into the amount you intend to borrow.
If a personal loan doesn't work for your situation, you can consider these other options:
- A 0% balance transfer card: You'll have an interest-free period, often 18-21 months, to pay your bill before you'll be charged the regular interest rate
- Business credit card: A nice option if you're looking to cover business expenses specifically
- Savings account: This is a worthwhile choice if you have time to save up and can set aside a little each month
- Grants: Local or federal money is sometimes available for small business owners, but it can take a bit of research to find

Jackie Lam

Jackie Lam is a freelance writer with experience covering small business, insurance, budgeting, freelancing and money, and personal finance. Her work has appeared in Salon.com, BuzzFeed, U.S. World & News Report, Time's NextAdvisor, Forbes, and Refinery29. She is an AFC (accredited financial coach) and works with artists, freelancers, and small businesses to improve their relationships with money.

Best Personal Loans for the Self-Employed

Can You Get a Personal Loan If You're Self-Employed?

Ways You Can Use Your Loan

14 Ways You Can Use a Personal Loan

Challenges of Getting a Loan When You're Self-Employed

Best Personal Loans if You're Self-Employed

Best for Limited Credit Profiles: Upstart

Upstart

Overview

Pros

Cons

Best for Fast Funding: LendingPoint

LendingClub

Overview

Pros

Cons

Best for Competitive Interest Rates: LightStream

LightStream

Overview

Pros

Cons

Best for Bad Credit: Upgrade

Upgrade

Overview

Pros

Cons

Best for Consolidating Credit Card Debt: Happy Money

Happy Money

Overview

Pros

Cons

Best for Small Borrowing Amounts: LendingClub

LendingClub

Overview

Pros

Cons

Tips to Improve Your Chances of Approval

Personal Loans When You're Self-Employed: Pros and Cons

Pros

Cons

Pros

Cons

How to Qualify for a Loan When You're Self-Employed

Tax Guide & Tips for the Self-Employed & Independent Contractors

How to Choose a Personal Loan

How to Prequalify for a Personal Loan, and Why It Can Be a Good Idea

Alternatives to a Personal Loan

Business Credit Card

Best Business Credit Cards

0% APR Credit Card

Savings Account

Grant Money

FAQs

Is it harder to qualify for a personal loan if you're self-employed?

Can you get a loan if you have bad credit and are self-employed?

Can freelancers get a loan?

Is it a good idea to take out a loan if you're self-employed?

What are some alternatives to a loan for self-employed people?

Jackie Lam

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