How to Get a Personal Loan for Self-Employed

Being your boss? Awesome. Trying to get a personal loan when you’re self-employed? Not so awesome.

According to the latest data from the Current Population Survey (CPS), about 16.75 million people are self-employed. That’s around 10% of all workers. 

If you’re one of those 10%, you’ve probably run into a few raised eyebrows when applying for a loan without a traditional 9-to-5 income. 

But don’t worry. There are plenty of ways to request a self-employed personal loan.

What Does a Self-Employed Professional Mean?

Before we talk about personal loans, let’s make sure we’re on the same page about what “self-employed” really means, because it covers more people than you might think.

If you earn income on your terms without receiving a regular paycheck from an employer, you’re considered self-employed. That includes:

• Online business owners, like Etsy Shop owners, dropshippers, and content creators.
• Freelancers include writers, graphic designers, photographers, and web developers.
• Gig workers like Uber and Lyft drivers
• Consultants and contractors, like IT specialists and business coaches. 

What Are the Difficulties of Getting a Loan for the Self-Employed?

The main issue is that lenders like stability. They enjoy seeing a consistent paycheck, steady employment, and proof of income. But when you’re self-employed, your income may vary from month to month, and your paperwork looks a little different. 

Let’s break it down even more:

• Irregular income: One month might be busy and profitable, and the next could be slower. This inconsistency can make lenders question whether you can make your monthly repayments. 
• Lack of traditional payslips: Most self-employed people don’t get W-2s or employer-issued payslips. Instead, you’ll need to show tax returns, bank statements, or a profit and loss statement to prove your income. 
• More documentation: Lenders typically require at least two years of financial history. For you, this means up-to-date tax filings, detailed accounts, and proof of ongoing work or client contracts.
• Higher risk perception: Even with a good income and strong credit, lenders may still view you as riskier simply because you don’t have a traditional employment structure. It’s even harder if you want loans for the self-employed with bad credit. 

6 Types of Personal Loans Available for Self-Employed Individuals

The good news? There are plenty of loans available for self-employed individuals. 

1. Traditional Bank Loans

Yes, banks do lend to self-employed borrowers. Traditional bank loans often come with lower interest rates and longer repayment terms, but they also have strict requirements. They want reassurance that you can repay your loan consistently, especially when you don’t have an employer backing your income. 

Usually, they ask for at least two years of self-employment history to show stability and help the bank average out your income. They will also request full tax returns for the past two years, including both personal and business filings. Plus, they’ll need your personal and business bank statements. 

Lastly, they will ask for your business documents, such as your registration certificate, license, or proof of ongoing work, like contracts or invoices. 

2. Credit Union Loans

Unlike big banks, credit unions are nonprofit and member-owned. This means their focus isn’t on squeezing out profit — it’s on supporting their members. And that often translates to better loan terms and a more human approach to applications. 

To apply for a self-employed loan at a credit union, you first need to have a membership with the union. So, if you’re not already a member, look into joining one. 

You’ll also need to provide the same information that you would when applying with a bank, like proof of self-employment, business registration, invoices or tax returns, bank statements, and credit history. 

3. Online Personal Loans

Online lenders are often faster because they use automated systems that review your application quickly. 

They’re also more flexible and open to non-traditional income streams compared to banks and credit unions. Some may be willing to accept alternative documents, such as bank deposit summaries. 

The process of requesting money online is also more straightforward, as it requires less paperwork. 

However, you also need to be careful when requesting self-employed loans online because you might be offered a higher rate, especially if your credit score is average or your income is inconsistent. 

4. Peer-to-Peer (P2P) Loans

P2P lending might also be an alternative if you don’t want to go through a traditional bank or credit union. Here, people lend money directly to others through various platforms to help and earn interest at the same time. 

That’s why these platforms may also be a good fit for independent contractors with bad credit to request loans. 

All you need is proof of income, like tax returns, bank statements, or accounting reports. You’ll also need to explain how you’ll be using the funds in the loan application. 

5. Secured Personal Loans

With secured loans for the self-employed, you offer something valuable to the lender as collateral. It can be a vehicle, a savings account, or business equipment. 

Securing the loan reduces the lender’s risk, which can work in your favor, too. Because something is backing the loan, lenders may offer better rates than they would for an unsecured loan. You may also be able to access a larger loan if the collateral has enough value. 

But be extra careful. If you miss payments, the lender has the legal right to take ownership of your collateral. 

6. Cosigner Loan

If your self-employment income isn’t quite enough to qualify for a loan on your own, a cosigner loan might be a smart solution. This type of loan lets you apply with someone who has a stronger credit profile — typically a family member or close friend — which can boost your chances of approval. The cosigner agrees to take on responsibility for the loan if you can’t make the payments, giving lenders more confidence in your application. 

You’ll still need to provide your usual documentation, like proof of self-employment, tax returns, and bank statements, but your cosigner’s credit and income will also be factored into the approval process.

Things to Consider Before Taking a Personal Loan for the Self-Employed

Here’s what you need to keep in mind to plan as a self-employed person:

Is Your Income Consistent?

When you work for yourself, your income can change from month to month. One month, you’re doing great; the next might be slower. Ask yourself if you can still make the loan payments during slow months. Also, do you have some savings set aside, just in case? 

To stay on the safe side, try to budget based on your lowest-earning month and not your best one. 

What Kind of Interest Rate Are You Getting?

You need to know your interest rate, as it affects the cost of your loan. Of course, lower is better, but there’s more to it. 

If you have a fixed interest rate, your monthly payment stays the same. 

If you have a variable interest rate, your payment might go up or down. Planning can be a bit harder. 

What’s the True Cost of the Loan?

To get a clearer picture of the total cost of borrowing, always check the Annual Percentage Rate (APR) and calculate the cash advance interest, as it includes both the interest rate and any applicable fees, such as origination fees and administrative costs.

How Long Will You Be Paying It Off?

Have you figured out what monthly payment fits your budget? Have you thought about whether you’d rather pay off the loan faster and save on interest, or make smaller monthly payments but pay more in total interest? 

Think about all these questions to help you find a balance between what you can afford now and what makes sense in the long run. 

Do You Need the Loan Right Now?

Seriously. If the loan will help you move forward with your business and personal finances, that’s great. But if it’s just a short-term fix, it might be better to hold off. 

So, think about whether you could wait and save up instead, or if there are other options available, like a grant or low-interest credit.

Is Your Credit Score in Good Shape?

Your credit score affects both your chances of getting approved and the rate you’ll pay. To get in better shape, pay off any existing debts, make payments on time, and keep your credit card balances low. 

It’s also a good idea to check your credit report for errors and report them to the credit bureaus to get them corrected. 

Have You Shopped Around?

Always compare a few options from different lenders before making a decision. That’s because even a slight difference in rates or fees can add up to significant savings over time. You can do this by using online comparison tools, asking lenders, and reading the fine print. 

How to Increase Chances of Getting Approved for a Personal Loan?

To make yourself a stronger applicant and increase your chances of getting approved for a personal loan, start by organizing your documents, such as tax returns, bank statements, and business records. You know the lender will ask for them, so make sure they’re ready beforehand. 

If your credit needs work, start working on it the moment you decide to take out a loan and pay off some of your existing debts to lower your debt-to-income ratio. These are two things lenders care about. 

If you’re applying for a bigger loan or if you couldn’t get your credit in shape on time, consider offering collateral. 

FAQ about Self-Employed Loans

Can I Get a Personal Loan as a Self-Employed Individual with No Proof of Income?

Some online lenders might consider bank deposits, invoices, or contracts with clients. Still, most legit lenders need some form of income verification to protect themselves and you. 

What Documents Are Needed for Self-Employed Personal Loans?

Typically, lenders ask for the following: two years of tax returns, personal and business bank statements, business license or registration, profit and loss statements, invoices or client contracts

How Much Can Someone Who Is Self-Employed Borrow with Personal Loans?

The amount you will get depends on several factors, like your credit score, verified income, debt-to-income ratio, loan purpose, and the lender’s policies. 

Sources

• U.S. Bureau of Labor Statistics. “Employment Situation Summary – March 2024.” BLS. Accessed March 28, 2025.
• Internal Revenue Service. “Self-Employed Individuals Tax Center.” IRS. Accessed March 28, 2025.
• U.S. Small Business Administration. “Loans and Funding Programs.” SBA. Accessed March 28, 2025.
• First American Bank. “How Freelancers and Self-Employed Borrowers Excel.” First American Bank. Accessed March 28, 2025.
• Investopedia. “How Does a Credit Union Personal Loan Work?” Investopedia. Accessed March 28, 2025.
• Discover. “Secured vs. Unsecured Personal Loans.” Discover. Accessed March 28, 2025.
• ICICI Bank. “Important Questions to Ask Before Taking a Personal Loan.” ICICI Bank. Accessed March 28, 2025.