How to get a loan for the self-employed

Why the self-employed may have difficulty obtaining a loan

When a bank decides whether to give a person a loan or not, they evaluate it according to own scoring system. Usually it is secret so that attackers cannot bypass it. But in general, you can understand what criteria distinguish a promising borrower.

Many factors matter, in particular, the financial situation. Ideally, the loan recipient works under an employment contract and receives a stable income that he can confirm. It’s good if his salary comes to a bank account where he asks for a loan. Then it is easy for the institution to track the movement of funds and make sure that the client has enough money to pay off the debt.

FROM self-employed, that is, with those who pay tax on professional income, from the point of view of banks, everything is difficult. Firstly, the tax regime itself appeared relatively recently - in 2019 - and is still listed as experimental. So some organizations simply do not want to get involved with people whose interaction algorithms are not fully developed. Plus, the work of the self-employed is not perceived as stable enough. According to the employment contract, the salary will come every month. And the self-employed have income today, but not tomorrow. For a bank, a small fixed income is better than a high volatile one.

Therefore, it is more difficult for self-employed people to get a loan than for hired employees. However, this does not mean that such loans are not issued at all. It happens that banks do not even ask for income statements or a copy of the work book (now an extract from the electronic work issued by the Pension Fund is also suitable instead). But for this you need to study the market and understand who is ready to give money on such conditions. In addition, certificates and extracts help to get more favorable conditions or increase the loan amount.

How to increase your chances of getting a loan as a self-employed person

Get a good credit history

Good credit history implies that a person has taken and repaid several loans. Moreover, payments were made on time, without delays. And at the same time, it is desirable that there are no radical early repayments. If the client returns the amount too quickly, he does not allow the bank to earn on it. So it is unprofitable for the institution to contact such people.

A good credit history demonstrates that the client knows how to distribute cash flows and pay off debts. And if it is empty, it is rather a minus. After all, if there is no information about the payment discipline of a person, it is difficult to draw conclusions about him. And the self-employed is already a dark horse for the bank.

Of course, the advice sounds a little paradoxical. How can a person who finds it difficult to get a loan take and repay several loans? But consumer loans for small amounts are usually issued not only to everyone, but without draconian requirements.

Pay off all debts

In the last paragraph, it was no coincidence that the wording was “take and return”. Ideally, you should not have active loans. Otherwise, the bank may doubt that you will be able to pay both the current one and the one that they will give you at once.

At the same time, it is worth remembering whether you have credit cards. Even if you do not use such a card, its presence can become a stop signal for the bank. Because now you have a debt on it, perhaps not. But he could show up at any moment.

Collect Documents

The self-employed will need two certificates:

1. On the registration of the NAP payer.
2. About income.

The first reflects the length of service as a self-employed person, the second reflects the volume and regularity of cash receipts. Both can be obtained from the My Tax app on your phone or browser version.

Contact your bank

If you are a good and long-standing client of a bank, you may well be provided with favorable conditions there. After all, they see the movement of funds in your accounts for years.

Make a significant down payment

Issuing a loan for a bank is a risk. And they try to minimize it in different ways. One way to show that you are serious about repaying a debt is to take out a loan to buy something specific and make a significant down payment.

For example, for a car loan, such a fee is 10%. Depending on the cost of the car, the amount will be different, but in any case rather big. And until the client pays, the acquisition will be pledged to the bank. So there are two options - to give money regularly or not to give it back, but risk the amount already deposited, because the bank will be able to sell the car in order to return its own. If the down payment is made in a larger amount, this can increase the loyalty of the institution.

Get a loan secured by property

You can confirm your intention to repay the debt if you give the bank something as collateral. Moreover, “give” here does not have a literal meaning. If you take out a loan secured by, for example, an apartment or a car, you can continue to use them. Only here you can not sell, donate, exchange this property. And the bank has the right to sell it if you stop repaying the loan.

In this situation, it is no longer so important how much you earn. The motivation for the return of money, according to banking algorithms, is still quite high.

Attract guarantors

If someone from your relatives or acquaintances with a stable job and income is ready to take on this role, your chances of getting a loan will increase. True, here you will have to prove your decency and conscientiousness not to the bank, but to them.