Compare personal loans for self-employed borrowers

Taking out a personal loan typically requires a borrower to meet a set of lending criteria from the lender. But for self-employed Australians, it can be difficult to provide the traditional income verification documentation that lenders require. 

This is where self-employed personal loans come in, making it possible for those who work for themselves and run their own business to gain loan approval.

If you’re self-employed, you may find that you can gain loan approval through these avenues: 

• Low-doc personal loan – A ‘low documentation’ personal loan may allow self-employed borrowers to obtain finance without having traditional income verification documentation, such as a payslip from an employer.
• Specialist loan – Some personal loan lenders specialise in providing personal loans for self-employed Australians. These lenders may require you to provide income verification in the form of past personal and business tax returns, ABN and GST registration information.
• Secured or Unsecured personal loans – You may still qualify for a standard personal loan and opt for a secured or unsecured option, depending on your employment status and your income.  

For a standard personal loan, you will typically need to provide a payslip from an employer and other income verification documents to meet a lender’s eligibility criteria: 

For self-employed Australians, this is understandably not possible. Instead, a specialist loan or low-doc personal loan may require the following documentation:

• Proof of identification, such as a passport or driver’s licence
• Your Australian Business Number (ABN)
• Evidence you’ve been employed in the same industry for at least 12 months.

 You may also need to include at least two financial years’ worth of:

• Company tax returns
• Personal tax returns
• Past notice of assessment
• Past business activity statements (BAS)
• Past notice of assessment
• P&L statement for the business
• Balance sheet for your business (covering last 12 months)
• Proof of ABN and GST registration for at least two years

Gaining personal loan approval is all about meeting the lending criteria set by a personal loan provider.

Outside of ticking the boxes listed above, there are a few steps you can take to potentially boost your chances of loan approval, including:

1. Improve your credit score – Lenders will always favour borrowers with excellent credit scores. As a borrower with excellent credit is perceived as less risky and less likely to default, the lender is more likely to approve the loan and offer you a lower interest rate. Consider grabbing a copy of your credit report and working to boost your credit score before you apply.
2. Industry experience – With a standard personal loan application, a lender may be more likely to approve an application when the borrower has been employed long enough to leave the company’s probation period (3-6 months). If you are self-employed, consider waiting until you’ve been employed within your industry for 24 months so you can not only tick the boxes listed above, but show that there is stability within your business.
3. Guarantor or co-sign – Another option that may increase your chances of loan approval is considering having someone (typically family or spouse) come on to the personal loan to support your application. This may be possible through applying for a guarantor personal loan or considering having someone cosign for a joint personal loan.

The time it takes to gain personal loan pre-approval or full approval can depend on several factors, including your personal financial situation and the lender you choose.

Generally speaking, filling in a loan application can take around 15 minutes, providing you’ve already gathered your relevant documentation ahead of time. Gaining loan approval, however, will depend on the lender you choose. Some lenders may provide approval and funds only hours after applying, while others may take several business days.

There are several tools available from RateCity that may help you to find your ideal personal loan as a self-employed Australian, including

• Comparison table

A personal loan comparison table allows you to create a personal loan short list and view loan options side by side. Simply search by loan amount and loan term and use the filters to find products that may be more suited to your needs.

• Repayment Calculator

RateCity’s personal loan Repayment Calculator may show you an estimate of how much your personal loan repayments could cost based on the amount you’d like to borrow, your preferred loan term and interest rate. The repayment calculator can also provide you with an estimate of the total interest payable and total amount payable based on weekly, fortnightly, or monthly repayments.

• Real Time Ratings™

Real Time Ratings™ is a world-first system that ranks personal loans in our database, based on your own individual requirements. Each personal loan is given a score out of five stars, based on loan costs and flexibility, in real time as you use the site.

If you’re still not sure whether a self-employed personal loan is the right fit for your goals and financial situation, it may be worth comparing your options.

• Guarantor personal loan

As mentioned above, a guarantor personal loan is another option to consider when trying to boost your chances of loan approval. By having another person (typically family) guarantee your personal loan application, and even offer up security as collateral, a lender may be more likely to approve your application.

• Buy now, pay later

Depending on the amount you’re looking to borrow, another option to consider may be using a buy now, pay later (BNPL) platform. Most BNPL providers offer access to credit up to $1000-$2000, with a set number of interest-free repayments then made on a fortnightly basis. Some providers may offer customers the ability to purchase items worth tens of thousands of dollars as well.

• Home equity loan

A home equity loan involves you using the equity in a property as security to borrow money. If you’re a homeowner looking to access funds for a renovation, for example, this may allow you to use your home equity to inject value back into the property. The two main types of home equity loans are lump sum payments (similar to a personal loan) or a line of credit (similar to a credit card).