How do I get a loan if I’m self-employed? 4 things to know.

Business owner in his coffee shop looking up loans for self-employed people on his digital tablet Image: Business owner in his coffee shop looking up loans for self-employed people on his digital tablet

In a Nutshell

It’s possible to get approved for a personal loan when you’re self-employed, but lenders will likely put your finances under a microscope to make sure you earn enough income to keep up with payments. In place of federal W-2 forms, lenders may ask questions about your business and request other financial records to verify income.

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Being self-employed can make applying for a loan a bit complicated — you don’t get pay stubs or W-2s from an employer that show you earn enough income to make monthly payments.

Fortunately, this doesn’t mean you’re out of luck when it comes to applying for a personal loan. Here’s what you need to know about loans for the self-employed.


Can I get a loan being self-employed?

Before lending you money, lenders typically review your credit, income and other factors to assess how likely you are to pay the loan back on time. But when you’re self-employed, proving you have a steady income stream and can make on-time payments may be a challenge. If you don’t have W-2s to rely on, here are some other ways you can prove you’re a solid candidate for a loan.

1. Tax returns and tax transcripts

In lieu of a W-2s or pay stubs, some lenders may request several years’ worth of tax returns or tax return transcripts to verify your income. A tax transcript is a document from the IRS with financial information that’s on your tax return, such as your adjusted gross income.

Keep in mind — lenders may review your net profit or loss and not just your gross income. So, if you bring in $75,000 annually as a self-employed graphic designer, but your net profit is adjusted to $60,000 after expenses, the lender may decide whether to approve you based on the $60,000.

Keep reading: How do I file a self-employed tax return?

2. Bank statements

A lender may ask for several weeks’ worth of bank statements to see whether you’re depositing enough income into your bank account to keep up with the monthly installment payment.

3. Collateral

If you’re unable to get an unsecured loan, you may want to consider one that’s secured. A secured loan is a type of loan that’s backed by property like a car or certificate of deposit.

Putting up collateral minimizes your lender’s financial risk, which can make it easier for you to get approved. But keep in mind that if you default, the lender may take possession of the property (or savings) to recoup the cost of the loan.

4. A co-signer

Applying with a co-signer may be another option, especially if you have bad credit or you’re unable to meet other minimum loan requirements on your own. A co-signer is someone who is equally responsible for repayment, which adds a layer of security for the lender if you’re unable to make payments.

Loans for self-employed workers

Several online lenders do business with self-employed workers. Here are three examples.

  • Payoff Payoff specializes in credit card debt consolidation. You can borrow up to $35,000 to consolidate your credit card balances into one fixed monthly payment. Payoff uses your tax return and Schedule C to verify income. Payoff may also request recent bank statements for bank accounts where you receive income.
  • Upgrade Upgrade is an online lender that offers unsecured installment personal loans of up to $50,000 for home improvements, major purchases and more. For self-employed workers, Upgrade asks for two years of full tax returns including Schedule C, tax transcripts from the IRS and bank statements for the last 40 days.
  • SoFiSoFi is an online lender that will lend up to $100,000 in an installment loan to cover medical procedures, debt consolidation, home improvements or relocations. If you’re self-employed, SoFi looks at your credit scores, education, financial history and monthly income against expenses to help make a decision. A co-signer may also help you get an approval.

Personal loan alternatives

If a personal loan doesn’t work for your needs, here are a few products to consider.

Credit cards

If you’re unable to get your hands on a personal loan, a credit card may be another solution. Making on-time credit card payments can help you build a positive credit history so you may qualify for a personal loan in the future. Plus, you may be able to rack up points, miles or cash back whenever you swipe if you choose a rewards card.

Cash advances

A cash advance is a short-term loan you can take from your credit card. If you need cash in hand, taking a cash advance is an alternative to swiping your credit card. Just be aware that the APR for a cash advance tends to be higher than the APR for purchases.

Home equity loans or home equity lines of credit

If you own a home, you may be able to borrow from equity in the home through a home equity loan or a home equity line of credit. A home equity loan is an installment product with a fixed term. Because a HELOC is a line of credit, you make payments only on the amount you borrow. When applying for a home equity product, lenders may ask for your recent tax returns to verify self-employment income.

Pawn shop loans

A pawn shop loan could be an option if you’re looking for a loan that requires absolutely no credit check or proof of income. To get a pawn shop loan, you exchange an item like jewelry for its cash value. The pawn shop holds the item until you repay the loan. Interest and fees may be high, and you risk losing your property if you’re not able to pay the loan back.


What’s next?

If you’re self-employed and considering a personal loan, the first step is checking your budget to see what you’re able to spend on a monthly loan payment — you don’t want to get approved for a loan and realize you’re in over your head.

The next step is comparing loan options from multiple places, including banks, online lenders and credit unions. Shopping with multiple lenders can help you find a product with the most competitive terms and fees.