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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 January 18, 2022
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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 and, although income verification while self-employed can involve a couple of extra steps, personal loans for self-employed people are quite attainable. Here’s more information on how to get a personal loan when you’re your own boss. 

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 offering personal loans with a wide range of interest rates and terms. Borrowed funds can be used for numerous purposes from consolidating debt to taking vacations to planning weddings to home renovations, medical bills, and more. Personal loans typically can’t be used for business expenses. But 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. 
  • 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. 
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.
Here’s more about each.


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 be approved when the main borrower doesn’t have established credit or good credit scores, or doesn’t have enough income. So, 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. If your credit scores are the challenge to overcome, then exploring personal loans for the self-employed with bad credit may be helpful. 


If using a cosigner doesn’t seem like a productive strategy for you, looking into secured personal loans may be. 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 keep the collateral. Secured personal loans may also have lower interest rates.

Lenders With Self-Employed Loan Offerings

When looking at the best personal loan for self-employed people, 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
Axos6.79% to 17.99%$10,000 to $50,000Tax documents for the two most recent years
Lending Club7.04% to 35.89%$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 your company within a given year.

Bank Statements

These statements will give the lender additional information about your financial picture, information that can be independently verified by your bank or credit union. Overall, the lender is trying 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 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 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 the documentation as income verification. 

General Personal Loan Tips

At a high level:
  • Gather paperwork.
  • 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 — and, if so, at what interest rate. If that presents a challenge, here are improving credit score tipsAs noted throughout this post, lenders typically look at a person’s income and will often have a minimum salary requirement (even if they don’t explicitly say so). For self-employed persons, this may be proved 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. 

Compare Rates

When you compare personal loan lenders and the interest rates they charge, it’s also a good time to compare other aspects, including fees or other upfront costs. Double checking the terms and conditions about how you can use the loan funds is another important thing to be aware of. 

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 good order.

Choosing a Good Loan Option for You

The personal loan program that works well for one self-employed person may not be ideal for another. To determine the best personal loan for self-employed people 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.
There are also alternatives to a personal loan to consider.

Alternatives to Personal Loans

You might want to weigh the pros and cons of personal loans vs. home equity loans to make sure a personal loan is the best option for you. Also consider what collateral you might put up for a secured personal loan, if that’s a better fit for your financial needs than an unsecured personal loan might be. If you’re looking specifically for a loan for business-related expenses, you may want to consider SBA loans for self-employed people.  

The Takeaway

Being your own boss can be an attractive employment path for some people. But the path to getting a personal loan for a self-employed person can have roadblocks that may slow the process. When applying for a personal loan, you can fill out one convenient application at Lantern by SoFi and receive offers from lenders in our network. It takes just a few minutes to see offers so you can start comparing lenders right away.See personal loan rates at Lantern by SoFi
SoFi Loan Products SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC), and by SoFi Lending Corp. NMLS # 1121636, a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law (License # 6054612) and by other states. For additional product-specific legal and licensing information, see Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
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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