There are lots of different types of loans, from personal loans to business loans. You can also get loans for start-up businesses or bigger companies and they can help with cash flow problems, or if you are looking to invest in equipment or staff, for example.
If you're self-employed or a sole trader, you have lots of options. But the right type of loan for you will depend on how much you need, what you need the loan for, and your credit score.
In this article, you'll learn all about self-employed loans, how they work and who they are suitable for, and we've also picked out some of the top loans available for self-employed people.
| Provider | Score | Details |
|---|---|---|
| 1. Funding Circle | ★★★★★ | Click Here |
| 2. Selfy Loans | ★★★★★ | Click Here |
| 3. SME Loans | ★★★★★ | Click Here |
| 4. Ocean Finance | ★★★★★ | Click Here |
| 5. Norton Finance | ★★★★★ | Click Here |
| 6. Proper Finance | ★★★★★ | Click Here |
What is a self-employed loan?
When you're self-employed, being in complete control of your finances, paying your tax bill, and ensuring you make a liveable income can be tricky. It's no secret that your income can fluctuate when you're self-employed, and not every month looks the same.
Self-employed workers are freelancers and or sole traders; they don't work for an employer. They run their own business and hold sole responsibility for its success.
From time to time you may need a little extra financial help. This could be a credit card or a loan, for example. There are personal loans for self-employed workers to help for business purposes; whether you need new equipment or borrow money for a business trip, a personal loan can help you in your hour of need.
There are three types of loans for sole traders:
- Secured loans: A secured loan is a loan you take out whilst pledging an asset (such as your house if you own it) as collateral. Secured loans are also known as homeowner loans.
- Unsecured loans: An unsecured loan eligibility is determined by your credit and financial history. The most common unsecured loan is a personal loan.
- Guarantor loans: A guarantor loan requires a third party, like a family or friend, with a good credit history to guarantee the loan. Guarantor loans are ideal for someone struggling to get other loans.
Read About: Best Guarantor Loans in 2024
Some have an income requirement and will depend on your credit history.
The pros and cons of self-employed loans
Taking out any line of credit can be risky.
Before introducing you to the available self-employed loans, we will explore all the pros and cons.
| Pros | Cons |
|---|---|
| ✔️ You can borrow more significant sums of money than taking out a credit card. Depending on your credit rating and self-employed income, you could get a loan up to £25,000. | ❌️ Your loan application may only be accepted with a good credit rating. Most lenders will require you to have a good credit history. |
| ✔️ When taking out a loan, you can agree on the repayment term. Typically, you can take out a personal loan for up to seven years, giving you more time to make repayments. | ❌️ If you fail to repay your loan, you could pay extra fees, potentially harming your credit rating. So, only take out a loan if you can make all loan repayments. Additionally, some lenders will charge a fee if you choose to repay the loan early. |
| ✔️ You will benefit from lending with complete transparency. You will be told how much your monthly repayments are and choose the length of repayment terms. | ❌️ For a self-employed personal loan, you will need a lot of documentation, such as recent bank statements, personal details, proof of income, rental income and more. |
| ✔️ If you have a bad credit file, you can apply for a secured or a guarantor loan instead of a personal loan. | ❌️ Taking out a loan can be expensive; on top of your monthly repayment, you must pay interest on the amount you borrow. The interest rate is agreed at the beginning of the contract. |
| ✔️ Loans typically have a quick turnaround time. If your application is accepted, you could have the money in your bank account within three to five working days. |
The best loans for self-employed people — reviewed
The best type of loan for you will depend on lots of different factors, including your credit history. But here are 6 of the best to consider.
1. Funding Circle: Self-Employed Loans for Small Businesses
- Loan amount: £10,000 to £500,000
- Interest rate: From 8.9% per year
- Repayment term: Six months to five years
Funding Circle offers business loans up to £500,000. Self-employed loans can help boost cash flow, help with payroll, grow your business, pay business expenses, manage uncertainty and cover revenue gaps.
The application process is quick, only taking 10 minutes, and you can get approved within an hour. Funds are typically deposited into your bank account within 48 hours if your application is accepted.
Funding Circle offers three types of self-employed loans: sole trader, partnership, and limited company loans.
Read About: Best Sole Trader Bank Accounts
2. Selfy Loans: Personal and Business Loans for the Self-Employed
- Loan amount: £1,000 to £15,000
- Interest rate: From 24.2%
- Repayment term: 18 to 60 months
If you've not got the most favourable credit file, Selfy Loans offers advice and loans for self-employed people or subcontractors. Selfy Loans specialise in assisting self-employed people get finance, and they don't charge an application fee.
They're a direct lender and offer a friendly face-to-face service. You can use the loan to buy new equipment tools, pay annual personal tax liability, and get professional qualifications.
To be eligible for a Self Loan, you must be over 21, self-employed for more than two years, earn a minimum gross income of £10,000, and have not been declared bankrupt or have an IVA.
3. SME Loans: Fast Funding Loans for Self-Employed Workers
- Loan amount: £1,000 to £500,000
- Interest rate: Unspecified, but you can get an instant quote
- Repayment term: One to five years
You can get an instant quote for a self-employed loan with SME Loans. SME Loans offer tools for self-employed workers, from self-employment overviews to loans and more to help you succeed. The loan requires a personal guarantee, so you can apply regardless of your credit history and will be accepted. Repayment periods are flexible.
SME loans also offer a merchant cash advance, which means you can receive an advance on revenue. These loans are from £5,000 to £500,000, and you repay using a small percentage of future customer transactions.
4. Ocean Finance: Self-Employed Loan from a Wide Panel of Lenders
- Loan amount: £1,000 to £15,000
- Interest rate: From 13.4% up to 99.9% APR
- Repayment term: 18 to 60 months
You can get a free quote without affecting your credit score when using Ocean Finance to locate the most suitable personal self-employed loan. When you apply for a loan, you will get an instant online decision, and all credit histories are considered. Ocean Finance provides access to loans, credit cards and mortgages to people across the UK.
To apply for a loan with Ocean Finance, you must provide details like name, address, job details, how much you would like to borrow, and how long.
5. Norton Finance: Self-Employed Loans
- Loan amount: £3,000 to £100,000
- Interest rate: From 6.7%
- Repayment term: One month to 30 years
You can apply for a secured or unsecured self-employed loan with Norton Finance. This lender has several options, so if you're worried about your credit file and own your home, you can apply for a secured loan.
You can have flexibility with your lending and use the online loan calculator to determine your terms and monthly repayment before you fill out the online application.
To apply for a loan with Norton Finance, you must provide personal details like your address for the past three years, company details or what your business does, tax return calculations, bank statements and evidence of rental income if you are a landlord.
6. Proper Finance: Loans for Self-Employed Individuals
- Loan amount: £10,000 to £1 million
- Interest rate: Unspecified
- Repayment term: 3 to 30 years
If you're looking for a larger loan, Proper Finance facilitates secured loans for self-employed people, allowing you to use the property as security to borrow. You can use your home, office, flat or other commercial property as collateral. A secured loan is ideal if you own property but don't have an excellent credit history.
To be eligible for a self-employed loan, you must be a UK resident over 18, have a working debit account, email address, phone number and the security to offer, and have a regular income.
The verdict
There are lots of options for loan for self-employed workers, and it's important to shop around and nott o go with the first one you see.
You should also pay close attention to the small print, the interest rate and any extra fees that may apply, for example.
If you need clarification on whether a loan suits your financial situation, it may be worth speaking with a financial advisor before filling out any loan applications, although you will have to pay for this service.
