Whether you classify as a freelancer, a contractor, a consultant, or a budding entrepreneur, those in the self-employed workforce share similar life experiences. Yes, there is the independence of being your own boss, but there is also the responsibility. And often, those responsibilities come with a cost.
Since no one wants to couple their budding freelance career with mounting credit card debt, it’s useful to have other avenues for funding available. That’s where a personal loan comes in. As the fastest growing consumer lending product, personal loans are especially useful to freelancers due to their versatility.
Need funds to cover your work expenses? With Fiona, users are matched with personalized loans from multiple top providers, all in one convenient place.
So how can freelancers use personal loans? Before we get to that, it’s important to discuss the process that goes into getting approved.
Can Freelancers Qualify for Personal Loans?
In short, yes. Personal loans have become increasingly more accessible in the internet era, thanks to fintechs that have streamlined the process and democratized lending for a broader spectrum of consumers. Having said that, employment and income are important aspects of the personal loan approval process. Requirements differ from lender to lender, but documentation will always be necessary when it comes to applying.
Since full-time freelancers typically cannot produce W2 forms, it’s important to have all of the other necessary documents at your disposal. That can include a 1099 form if applicable, as well as federal tax returns like a Schedule C or Schedule SE. On top of that, any type of pay stubs, bank statements, or other supporting documents can be extremely useful.
The key for freelancers is not only to prove income, but that it’s consistent. As a result, freelancers may need to require a longer history of wages/employment verification through these documents. Beyond that, creditworthiness plays a huge role in loan approval, as well as determining what amount and rate you can qualify for. Having a history of paying bills on time and in full, as well as maintaining a low credit utilization ratio, will do wonders for a consumer’s credit score and help freelancers immensely in the personal loan application process.
What Can Freelancers Do With Personal Loans?
The answer to this question can vary significantly, based on the type of work you do and what your biggest monetary needs are. Perhaps you are a graphic designer that needs a new workplace setup or software tools. Maybe you’re a freelance chef about to start your own food truck. No matter what, based on your creditworthiness and other eligibility requirements, a personal loan can provide a crucial financial boost.
With Fiona, users can compare personalized loan offers from $1,000 to $250,000 with APRs as low as 2.49%. Check what offers are available to you.
For freelancers seeking a personal loan to cover a big expense, it’s important to consider the repayment plan. The majority of personal loans have fixed interest rates, which include the same monthly amount over the life of the loan. Borrowers can decide if they want to pay off the loan quicker (and save on total interest) with larger monthly payments, or stretch out the loan over a longer term with smaller monthly payments. As a result, budgeting in your monthly payment, and how it fits in with your expected income over the loan term, is important for all freelancers to factor when applying.
Beyond using a personal loan to purchase goods or services, it can also be helpful for freelancers dealing with pre-existing debt. Many in the self-employed field may be struggling with credit card debt, or other unpaid bills, with piling interest. While taking out a personal loan may seem like an odd choice to address debt, it can actually allow a consumer to obtain a lower interest rate than what they’re currently paying. This can result in hundreds or even thousands in savings on interest, while consolidating can also simplify debt by turning multiple varying balances into one simple monthly payment.
With how far the personal loan has come in the 21st century, it makes sense for freelancers to explore all of the offers available in the peer-to-peer lending space. With Fiona, instead of bouncing from one lender website to the next, users can get matched with offers from top providers all in one place, fast and easy. And for freelancers worried about their credit, using Fiona has zero effect on your credit score.
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