Self Employed Personal Loans

For those who work from home, self employed personal loans are becoming much easier to obtain. As the popularity of freelancing and consulting markets grows and the need to drive down the cost of overhead increases, the world is beginning to view self-employment with more respect and validity, including financial institutions. Lenders tended to turn down the loan applications of freelancers or made the interest rates so high that the person working from home simply no longer found the financing worth the charges. Regardless of how successful the individual was who worked from home, the lending institution silently considered them unemployed. The tides are certainly changing, and now consultants and other people who work from home are being seen as entrepreneurs and ambitious. Entrepreneurs pay their loan payments. Therefore, banks are becoming more open to lending to a freelance professional, consultant or small business owner.

Now most financial institutions will offer self employed personal loans to any individual with accounts and pay records for three years or more. This places the burden of proof on the individual to keep clear and clean records of payments and expenses. Likewise, keeping the checking account or accounts in the black is a necessity to proving financial stability. If the work at home professional can provide this documentation, the loan application will be processed as if he is an employee of an existing business. If, however, he cannot prove his financial responsibility, has been in business for less than three years or failed to keep his accounts and records in order, the loan will not be as easy to obtain. This is not to say that it is impossible to get financing if a self employed person has been in business for only a short amount of time or had a few hard knocks to the bank account. The lenders will usually work to get borrowers the self employed personal loans that they need, but these loans usually comes at a price, in the form of higher interest rates and more fees.

To qualify for the best loan and to just maintain her own integrity, a work from home professional should strive to claim as much of her actual income as possible when reporting to the Internal Revenue Service. There are times when a stay at home professional could be tempted to claim less money in order to pay fewer taxes. However, when the time comes to apply for self employed personal loans, these individuals can only claim the amount of income reported to on their income tax reports. If this is a lower amount, the loan they want may not be approved at the salary they claimed.

A self certified mortgage loan is a financing package that allows the freelance professional or consultant to state an income and certify that they are being honest. Fewer and fewer lending institutions are willing to finance self employed personal loans with only a stated income, because history has shown that people will lie to get a loan. This deception led many banks and credit unions to lose money on state income loans. For this reason, keeping detailed records will always benefit the applicant in any loan situation, but especially when the applicant is a work from home professional.

One out of every five people who leave a standard employment position to work from home fails and has to return to regular employment. This is a twenty percent failure rate. Unemployment rates are not nearly that high. So, it is far more likely for a freelance professional or a consultant to lose income than a person in a standard employment situation. Therefore, it is financially riskier for a financial institution to lend money for self employed personal loans than it is to provide a mortgage package for a person who works outside the home. To offset the possible financial losses, the banks and other lending institutions usually require between twenty and thirty percent of the total amount of the loan as a down payment. A mortgage loan to a person working outside the home usually requires between three and ten percent, depending on the type of financing and history of the borrower.

Credit is invaluable to the application process for self employed personal loans. The loan to value ratio of the lending packages offered to work from home professionals are from seventy to ninety percent. This means that the bank will loan up to ninety percent of the individual's proven income. However, outstanding credit card balances and other revolving credit and debt accounts will subtract from the income the bank considers in the equation. For this reason, the freelance professional or consultant should attempt to pay off or pay down credit card balances and reconcile accounts before approaching a lender. Many times the changes made to an individual's credit history after the loan application process do not affect the outcome of the application. For this reason, the self employed individual should make every attempt to clean up her credit before even applying for financing.

Even for the work from home professional with less than perfect credit, there are options. The application process will still require proof of income, credit history and account records. However, the down payment may be higher and the interest rates will be quite a bit higher for the self employed personal loan applicant who happens to have poor credit. In the end, it still may be worth the higher interest rates to get self employed personal loans if they benefit the long term goals of the home business. "He hath taken a bag of money with him, and will come home at the day appointed." (Proverbs 7:20)

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