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A Guide to Personal Loans for the Self-Employed

Getting a Personal Loan While Self-Employed
Kelly Boyer Sagert
Kelly Boyer SagertUpdated October 15, 2023
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
Personal loans are a flexible way of getting funds to use for just about any purpose. While you do need to verify your income in order to qualify, personal loans for self-employed people are quite attainable. Keep reading for more information on how to get a personal loan when you’re your own boss, including qualification requirements, documents you’ll need to submit, and challenges you may run into. 

What Are Personal Loans?

A personal loan is a type of installment loan. The borrower receives a lump sum of money and then pays it back in regular payments over time. These loans can be secured with collateral or they can be unsecured with no collateral required. Lenders offer personal loans with a wide range of amounts, interest rates, and terms. Borrowed funds can be used for numerous purposes, including consolidating debt, taking vacations, planning weddings, renovating your home, paying medical bills, and more. Personal loans can also be used for business expenses. If you’re considering starting your own business and exploring tips to become self-employed, you may be thinking of ways to fund your new venture. A personal loan might be an option to consider in some situations, including:
  • You may have funds set aside to set up your business, but need a little extra cash to pay personal expenses until your business starts making a profit. 
  • You may be thinking of consolidating debts to better manage your personal finances and free up money in your budget to put toward your business expenses. 
  • You may have business items you need to pay for and don’t currently have the money saved up.
Recommended: Are Personal Loans Available for Uber Drivers?

Challenges of Getting a Personal Loan While Self-Employed

When someone applies for a personal loan, the lender assesses risk to determine if that borrower will likely be able to pay back the loan. Risk evaluation can focus on the person’s employment, income, and credit scores, among other factors. The process can be more complicated for a self-employed person because they don’t have a W-2 from an employer to show the financial institution. 

Getting Around Roadblocks to Self-Employed Personal Loans

Three ways you can often get self-employed personal loans are through:
  • Obtaining a cosigner
  • Putting up collateral
  • Applying with lenders who offer self-employed personal loans


Lenders like to reduce risk levels when approving an application, and seeking out personal loans with cosigners is one route to take. In general, cosigners are used to help a borrower get approved when he or she doesn’t have established credit, good credit scores, or enough income. If you’re applying for a self-employed personal loan and the lender has concerns about your income, adding a cosigner to your loan application may help.


Another option if you’re self-employed is to get a secured personal loan. With a secured loan, you’d put up collateral — a car, real estate, a savings account or certificate of deposit, or another asset of value you own. A lender will likely feel more comfortable approving a secured loan because if you default, they can seize the collateral. Secured personal loans may also have lower interest rates than unsecured personal loans.

Lenders With Self-Employed Loan Offerings

When looking at the best personal loan for those that are self-employed, here are some lenders to consider (annual percentage rates [APRs] and loan amounts are contingent on loan qualification):
Avant9.95% to 35.95%$2,000 to $35,000Tax documents for the two most recent years
Axos11.79% to 20.84%$10,000 to $50,000Tax documents for the two most recent years
Lending Club9.57% to 35.99%$1,000 to $40,000Recent tax return or other proof of income, e.g., 1099

Other Methods of Proving Income

Additional ways of providing proof of income to a lender include:
  • Tax statements
  • Bank statements
  • Business ledgers
  • Government benefits
  • Court-ordered agreements

Tax Statements

Self-employment income is reported on Schedule C and self-employment tax is reported on Schedule SE of federal tax returns. A lender might ask to see two years of your tax returns, including these two forms, to verify your income. They may also ask to see your 1099 forms, which are statements similar to W-2s, and they indicate how much a client paid you or your company within a given year.

Bank Statements

Bank statements give the lender additional information about your financial picture and allow the lender to ensure that you have steady income. The longer you’ve been self-employed and the more income verification you can provide the lender, the better your chances of getting approved. 

Business Ledgers

As noted by the Internal Revenue Service (IRS), it’s good practice to maintain detailed records of your business transactions. In a journal, you can list each transaction with the information derived from supporting documentation, such as a bill or invoice. Then, in a business ledger, you can have different accounts for different types of transactions and list the total dollar amounts from your journals. 

Government Benefits

The federal government has programs to help people pay for housing, healthcare, food, and other basic expenses. To receive this type of funding, they’ll need to demonstrate that they meet the guidelines, which include providing information about income. If a self-employed person has applied for some of these benefits, a lender for a personal loan may accept documentation from the government paperwork to help verify income. 

Court-Ordered Agreements

Using child support as an example, a court will typically consider income when calculating how much someone needs to pay. Although different states use different formulas, income calculations will almost certainly be part of any court-ordered payments, and a lender may allow a self-employed person to use that documentation as income verification.

General Personal Loan Tips

When applying for a personal loan, there are a few things you can do to make the process smoother. These include:
  • Gather your paperwork, including the documentation needed to verify your income.
  • Decide how much you need to borrow.
  • Be clear about your verifiable income.
  • List your debts, including balances, monthly payments, and lenders.
  • Check your credit reports.
  • Compare interest rates, terms, and fees.
  • Make the best choice for your situation.

General Personal Loan Requirements

A person’s credit score is one of the biggest factors that a lender will consider when deciding whether to approve a personal loan. If that presents a challenge, consider building your credit score before applying for a personal loan. Another personal loan requirement is your income. For self-employed persons, this may be proven through a combination of tax returns, bank statements, and other documentation. If you cannot easily verify your self-employment income, you might consider exploring no income verification personal loans.The lender may also look at your debt-to-income (DTI) ratio to determine how much of your monthly income will go toward making monthly debt payments. Many lenders want to see a DTI of less than 36%, although some will go higher for qualified borrowers. Recommended: Guide to Budgeting for Freelancers

Compare Rates

When looking for a personal loan, it’s always a good idea to shop around. Look at what different lenders have to offer, making sure to not only compare interest rates and terms, but also fees and other upfront costs.

Get Paperwork in Order

Most lenders will want to see at least two forms of government-issued ID from a borrower to prove their identity and prevent identity theft. To verify your address, they may ask to see a utility bill, lease agreement, or other proof of address. You’ll also want to get your income verification documents in order, as well.

Choosing a Good Loan Option for You

A personal loan that works well for one self-employed person may not be ideal for another. To determine the best self-employed personal loan for your unique financial situation, choose one that:
  • Allows you to borrow the amount you need
  • Has a payback term that works well for your needs
  • Comes with a favorable interest rate
  • Has an affordable monthly payment
  • Comes with no or low fees
  • Has credit score requirements that you can meet

Alternatives to Personal Loans

If you are struggling to qualify for a personal loan or are looking for alternatives, there are a couple of options you can consider.

Home Equity Loans or HELOCs

Both home equity loans and home equity lines of credit (HELOCs) can offer the funding you need with competitive interest rates and longer loan terms. Both of these products rely on you having at least 15% equity in your home, however. Because home equity loans and HELOCs are backed by collateral (your house), rates are typically lower than with personal loans.Recommended: Home Equity Loans vs Personal Loans: Which One Is Right for You?

Credit Cards

As a self-employed individual, you can also consider using a credit card instead of a personal loan. Certain credit cards may offer 0% introductory APR or rewards and cash back programs. If you’re able to pay your balance in full every month, you won’t pay interest on the amount you use. However, credit cards do typically have higher interest rates than personal loans. If you can’t pay in full, it’s easy to get trapped in the cycle of debt due to the amount you could pay in interest.

The Takeaway

Being your own boss can be an attractive employment path for some people. However, if you need a personal loan, there may be roadblocks that could slow down the process. Most lenders, for example, want to see two years of self-employment income in order to qualify you for a loan. This is to prove to the lender that your income is stable and that you’ll be able to repay the loan.If you’re interested in applying for a personal loan, consider Lantern by SoFi. Lantern allows you to search multiple lenders all in one spot, with just a single application and no obligation to you.See personal loan rates at Lantern by SoFi

Frequently Asked Questions

Can I apply for a personal loan if I just started my self-employed business?
How long does the application process for a personal loan usually take?
Do I need collateral to secure a personal loan if I’m self-employed?
Photo credit: iStock/RichVintage

About the Author

Kelly Boyer Sagert

Kelly Boyer Sagert

Kelly Boyer Sagert is an Emmy Award-nominated writer with decades of professional writing experience. As she was getting her writing career off the ground, she spent several years working at a savings and loan institution, working in the following departments: savings, loans, IRAs, and auditing. She has published thousands of pieces online and in print.
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