The lack of pay stubs or W-2s from employers can make loan applications seem complicated for self-employed professionals. Fortunately, installment loans are available for self-employed borrowers, even those with bad credit.
What is an Installment Loan?
With an installment loan, lenders give you a lump sum of money upfront, which you’ll need to repay in fixed monthly installments. Some lenders that offer installment loans extend financing to borrowers with bad credit. They will gather important information, such as how much debt you have, your cash flow, and your monthly transactions. This helps them understand your financial situation and help create a loan program for you.
How Installment Loans Affect Your Credit Ranking
Borrowing money can either impair or improve your credit score, depending on how you use the loan. Making payments on time demonstrates financial responsibility and allows you to increase your credit score. However, missing payments or defaulting on the loan can significantly damage your credit score.
You can make payments on time by setting up autopay. Many lenders offer discounts to those who use auto-pay, so be sure to ask potential lenders about this. When borrowing money for consolidating debt, some lenders offer to send payments to your creditors, so you don’t have to do it yourself.
How to Choose the Best Installment Loan
Here are some of the factors you need to consider when choosing a loan for your business:
- Be aware of the fees.Reputable lenders are transparent about the fees they charge. Some charge origination fees that are around 1% to 6% of the entire loan amount. Prepayment fees may also apply if you repay your loan early.
- Choose a reasonable term.Monthly payments for your installment loans should be manageable and tailored to your needs and preferences. Longer repayment terms could mean you’ll pay more in interest. Shorter terms could also mean higher monthly payments. Be sure to calculate your monthly payments based on the term length you choose before choosing a loan.
- Compare rates. Ideally, the loans you take on should have an APR between 6% and 36%. It’s important to compare rates from different lenders, so you can find the lowest rate for the loan you need. Many online lenders allow applicants to check potential interest rates without affecting their credit score.
- Consider lender perks. Some lending companies offer added benefits tailored to the reason why you’re applying for a loan. As mentioned, some lenders will send payment directly to your creditors if you’re borrowing money to consolidate debt. Other lenders may allow you to change payment dates or offer other solutions when your financial landscape changes.
Installment Loan Options for Self-Employed with Bad Credit
The following online lenders accept borrowers with bad credit, but they will also check your credit, income, and debt to assess your ability to repay the loan.
- MoneyMutualoffers short-term loans through several lenders. MoneyMutual connects borrowers with lenders that offer loans suitable for them. The application is fully automated, and a single application lets you receive several offers from different lenders. To qualify for a loan, you typically need to show proof of income, have a checking account, at least 18 years old, and a US citizen.
- Giggle Financeis an online lending platform that doesn’t have a minimum credit requirement, making it a great option for borrowers with bad credit. Instead, they check your bank statements and other financial statements to determine how much you can afford. Borrowers need to be at least three months in business to qualify for an advance. The entire loan application is fully automated and only takes less than ten minutes to complete. Once approved, you’ll receive the funds in minutes.
- CashUSA.comoffers loan amounts ranging from $500 to $10,000, and they also accept borrowers with bad credit. The repayment terms range from three months to six years, and you’ll know whether you qualify or not within minutes. To qualify, you need to have a valid checking account (this is where they’ll deposit the funds), at least 18 years of age, a US citizen or a permanent resident, and earn at least $1,000 per month. For self-employed professionals, bank deposits amounting to $1,000 may suffice.
Your Next Steps
The first thing you need to do as a self-employed professional looking to take out a loan is to check your budget. Figure out how much you can spend monthly on loan payments. The last thing you want is to get approved for a loan that’s too expensive for you.
Once you have a number in mind, compare loans from several lenders, including banks, credit unions, and online lending companies. In this way, you’ll find a product with the best rates, terms, and fees.