Many people like the idea of being their own boss and setting their own hours. They also like the idea of being in charge of how their business and career grow. The risks of going out on your own are worth it because you get to decide how you live and what you do for work. But there are also problems to deal with. Finding credit is one of the hardest parts of being your own boss. Lenders are often hesitant to give money to people who work for themselves, especially if they just started and can't show proof of steady income.
But as the UK economy continues to change and people are less likely to work for the same company for their whole lives, banks and other lenders are becoming more willing to lend to self-employed people. In fact, someone who works for themselves is just as likely to get a mortgage or other loan as someone who works for a company. Improvements to credit checks, which show lenders how you handle debt in general, and other changes to lending practises have made it easier and faster for self-employed people to borrow money.
Your credit score
Today, your credit score is the only thing that lenders use to decide whether or not to lend you money. Credit reports are becoming more important than proofs of income, and a self-employed person who pays all bills and monthly payments on other loans on time has a good chance of getting a loan. These same credit reports are what banks use to quickly decide whether or not to lend money to people who have regular jobs.
As the number of people who work for themselves grows, lenders are starting to compete for a piece of this lucrative market. The terms and rates are about the same as for other loans, and they are a lot better than they used to be. If you have taken out loans in the past as a self-employed worker, now may be a good time to refinance them with better rates and terms.
Loan with or without collateral?
You should also think about whether you want a secured loan or an unsecured loan. Most of the time, secured loans have better rates and are backed by your home or car. If you can't pay back the loan, though, the security is used instead. Now that it's easier to get an unsecured loan, you might want to think about it. This is especially true if the loan is for business, since it makes it less likely that your home or car will be repossessed.
In the end, self-employed people today have more options than ever before. Don't let this stop you from getting credit or make you settle for less-than-ideal terms or rates.
