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Self-employment loans
Self-Employment Loans Explained

Many people dream of being their own boss and running their very own business. However, anyone who has ever done it will tell you that self-employment is not the easy option. Still, there are hordes of workers out there who strive to work for themselves to have more control of their working lives, and in order to do that, some will have to get self-employment loans or self-employed loans.

Who needs self-employment loans?

If you are one of those who are determined to start your own business and who are prepared for the hard work ahead, a self-employment loan may be the perfect solution.

The purpose of self-employment loans is to meet the cash needs of self-employed people who wish to start a business of their own or who need funds to develop, grow, and expand their existing business.

How do self-employment loans work?

In the past, self-employed loans were rare and difficult to find. However, as an increasing number of people are choosing to work for themselves, self-employment loans have gained popularity in the US.

There are essentially two main types of self-employment loans:  

  • A secured self-employment loan is suitable if you are a homeowner. You can use the equity in your home as collateral to access the funds you need for your business. Secured self-employed loans generally enjoy more favorable interest rates as lenders feel there is less risk involved.

  • An unsecured loan is suitable for either homeowners or tenants who do not own or do not wish to put their property at risk in order to secure a self-employment loan. Unsecured self-employed loans generally carry higher interest rates as lenders deem this a riskier option; they cannot resort to selling off any asset should there be defaults on repayments.

As the majority of self-employed workers do not have a regular fixed salary, the key feature of self-employment loans is flexibility. In order to meet the needs and financial circumstances of many self-employed people, lenders have designed self-employed loans to have flexible repayment options. This effectively means that the self-employed borrower can make underpayments, overpayments, and can also enjoy payment holidays or breaks when necessary.

Where to go for self-employment loans

You can apply for a self-employment loan from various sources like traditional banks. You can also apply through the many loan providers who operate online. Shop around for the best deal for you and your circumstances.

If you need a self-employed loan quickly, choosing an online lender may be your best bet. Many online lenders are able to approve your loan application and give you their final decision within 24 hours. All you need do is to provide some basic personal information including details of the loan amount and loan term for which you are asking.

Some important considerations about self-employment loans

  • Do not choose the very first self-employment loan you are offered, no matter how attractive it may sound.

  • Spend time doing research and making comparisons between the different quotes you have received. Consider all the factors including loan amount, loan term, lender's fees, and repayment options

  • Choosing the right loan may make you significant savings in the future.

  • If you have a bad credit history or if you have faced defaults or bankruptcy, it is still possible for you to apply for self-employment loans. However, you will have to endure a high rate of interest on self-employed loans because of your poor credit score.

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