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Can you get a personal loan if you’re self-employed?

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.

What is a self-employed personal loan?

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

  • Low-doc personal loanA ‘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.  

How do you get a self-employed personal loan?

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

How can you improve your chances of getting a self-employed personal loan?

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.

How long does it take to get a self-employed 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.

StepAboutTime taken
ResearchTake time to compare the market and ensure you’re choosing the best personal loan for your financial goals and situation.1 hour
Assess financesEnsure your financial situation is in the most ideal position before you apply. This may involve boosting your credit score or paying off existing debts before you apply.Several days/weeks
DocumentationGather your relevant documentation ahead of time to make the application process as smooth as possible.1-2 hours
ApplicationFill in the personal loan application online or in a branch (if applicable).15 minutes
ApprovalDepending on your application, you may now gain loan approval and see the funds transferred into your account.1 hour – 2-3 business days.

How do you compare self-employed personal loans?

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.

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What are the alternatives to a self-employed loan?

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).

This article was reviewed by Personal Finance Editor Mark Bristow before it was published as part of RateCity's Fact Check process.

Frequently asked questions

Can I get a self-employed personal loan with bad credit?

It may be much more difficult for a self-employed borrower to successfully apply for a personal loan if they also have bad credit. Many lenders already consider self-employed borrowers to be riskier than those in full-time employment, so some self-employed personal loans require borrowers to have excellent credit.

If you’re a self-employed borrower with a bad credit history, there may still be personal loan options available to you, such as securing your personal loan against a vehicle of equity in a property, though your interest rates may be higher than those of other borrowers. Consider contacting a lender before applying to discuss your options.

What documentation is needed for a self-employed personal loan?

Personal loans may require a borrower to provide proof of identity, proof of residence, details of any other outstanding loans (including credit cards), details of assets they own (e.g. savings, car, property), and proof of income.

While borrowers in full-time or part-time employment can often provide payslips and similar documents to prove their income, self-employed borrowers may need to provide other documents, such as bank statements or tax returns, to demonstrate that their income can cover a loan’s repayments.

Can you refinance a $5000 personal loan?

Much like home loans, many personal loans can be refinanced. This is where you replace your current personal loan with another personal loan, often from another lender and at a lower interest rate. Switching personal loans may let you enjoy more affordable repayments, or useful features and benefits.

If you have a $5000 personal loan as well as other debts, you may be able to use a debt consolidations personal loan to combine these debts into one, potentially saving you money and simplifying your repayments.

What is a personal loan?

A personal loan sits somewhere between a home loan and a credit card loan. Unlike with a credit card, you need to sign a formal contract to access a personal loan. However, the process is easier and faster than taking out a mortgage.

Loan sizes typically range from several hundred dollars to tens of thousands of dollars, while loan terms usually run from one to five years. Personal loans are generally used to consolidate debts, pay emergency bills or fund one-off expenses like holidays.

How long does it take to get a student personal loan?

Completing an online personal loan application can often take anywhere from 10 minutes to 1 hour. Depending on your lender, processing your personal loan application may take anywhere between 1 and 24 hours. If your personal loan application is approved, you may receive the money in your bank account the following business day, or, in some cases, the same day.

What is a bad credit personal loan?

A bad credit personal loan is a personal loan designed for somebody with a bad credit history. This type of personal loan has higher interest rates than regular personal loans as well as higher fees.

Can I merge my personal loan with my home loan?

Yes, you can refinance your home loan and, in the process, merge or consolidate your personal loan and home loan. By doing so, you can lower the number of debts you have, and you may also reduce the total interest you have to pay.

However, you should consult a financial advisor or a mortgage broker to confirm that you are decreasing your total outstanding debt, including interest payments. The repayment term for a home loan can be much longer than that for a personal loan, and by merging the two, you could be repaying a higher amount over the full term.

Can unemployed single parents get personal loans?

It can be more difficult for unemployed borrowers to successfully apply for a personal loan. Most lenders require borrowers to have a regular income available to cover the cost of loan repayments.

If you’re self-employed, or if less than half of your income comes from Centrelink, you may not be eligible for some personal loan options. Consider contacting the lender before applying.

Is a personal loan a variable or fixed-rate loan?

Depending on the personal loan lender, you may be able to choose between a fixed and a variable interest rate. But, there are a few distinct differences between the two, so it’s important to weigh up the pros and cons before deciding on what’s right for you.

A fixed interest rate loan gets you the convenience of knowing exactly how much you need to repay each fortnight or month. On the other hand, you generally won’t be able to make lump sum or advanced payments to close your personal loan early - or at least not without a penalty.

With a variable interest rate personal loan, you may be able to get a longer loan repayment term, with the option of paying off the loan early. You typically won’t need to pay any additional charges for an early full repayment either. The potential disadvantage with an interest rate that can change is that your repayment is not entirely predictable, as it can fluctuate with the market. However, you’ll likely have more options as more lenders offer a variable interest rate personal loan.

Does refinancing a personal loan hurt your credit score?

Personal loan refinancing means taking out a new loan with more desirable terms in order to access a more competitive interest rate, longer loan term, better features, or even to consolidate debts.

In some situations, refinancing a personal loan can improve your credit score, while in others, it may have a negative impact. If you refinance multiple loans by consolidating these into one loan, it could improve your credit score as you’ll have only one outstanding debt liability. Your credit may also improve if you consistently pay the instalments on time.

However, applying to refinance with multiple lenders could negatively affect your credit if your applications are rejected. Also, if you delay or default the repayment, your credit score reduces.

Are there low doc personal loans?

Self-employed borrowers may be eligible for low doc personal loans, which require less documentation in their application process than many other personal loan options.

It’s important to remember that though low doc personal loans may require less paperwork, you may need to provide additional security, or pay a higher interest rate.

How can I get a $3000 loan approved?

Responsible lenders don’t have guaranteed approval for personal loans and medium amount loans, as the lender will want to check that you can afford the loan repayments on your current income without ending up in financial hardship.

Having a good credit score can increase the likelihood of your personal loan application being approved. Bad credit borrowers who opt for a medium amount loan with no credit checks may need to prove they can afford the repayments on their current income. Centrelink payments may not count, so you should check with the lender prior to making an application.

Should I get a fixed or variable personal loan?

Fixed personal loans keep your interest rate the same for the full loan term, while interest rates on variable personal loans may be raised or lowered during your loan term.

A fixed rate personal loan keeps your repayments consistent, which can help keep your budgeting consistent. You won't have to worry about higher repayments if your rates were to rise. However, on a fixed loan you’ll also potentially miss out on more affordable repayments if variable rates were to fall.

How much can you borrow with a bad credit personal loan?

Borrowers who take out bad credit personal loans don’t just pay higher interest rates than on regular personal loans, they also get loaned less money. Each lender has its own policies and loan limits, but you’ll find it hard to get approved for a bad credit personal loan above $50,000.

Can I get a bad credit personal loan with a guarantor?

Some lenders will consider personal loan applications from a borrower with bad credit if the borrower has a family member with good credit willing to guarantee the loan (a guarantor).

If the borrower fails to pay back their personal loan, it will be their guarantor’s responsibility to cover the repayments.

What is the average interest rate on personal loans for single parents?

Like other types of personal loans, the average interest rate for personal loans for single parents changes regularly, as lenders add, remove, and vary their loan offers. The interest rate you’ll receive may depend on a range of different factors, including your loan amount, loan term, security, income, and credit score.

Can I repay a $3000 personal loan early?

If you receive a financial windfall (e.g. tax refund, inheritance, bonus), using some of this money to make extra repayments onto your personal loan or medium amount loan could help reduce the total interest you’re charged on your loan, or help clear your debt ahead of schedule.

Check your loan’s terms and conditions before paying extra onto your loan, as some lenders charge fees for making extra repayments, or early exit fees for clearing your debt ahead of the agreed term.

Can I include my spouse’s income on a personal loan?

If you apply for a joint personal loan with your spouse, you can include their income on the application. If approved, they then become jointly liable for the loan.

Both you and your spouse need to meet the eligibility criteria, such as income, age, and residency requirements, as stipulated by the lender. A joint loan could increase your chance of approval for a higher amount, as both borrowers’ incomes are assessed when determining borrowing capacity. 

What is a credit rating/score?

Your credit rating or credit score is a number that summarises how credit-worthy you are based on your credit history.

The lower your score, the more likely you are to be denied a loan or forced to pay a higher interest rate.

Which lenders offer bad credit personal loans?

Several dozen lenders offer bad credit personal loans in Australia. These are generally smaller lenders that aren’t household names.