How To Secure A Loan When You Are Self-EmployedFast Action Finance
It does not matter how much of income your self-employment is helping you churn in every month and it does not matter what kind of great business you run – if you are self-employed and if you need to get yourself a loan, it would always be a problem. This is especially so if you are applying for a home loan. But this does not mean that everyone who is self-employed who is trying to get for a loan or a housing loan in particular are never going to land themselves with one. It is possible definitely, but the effort needed to get yourself a loan when you are self-employed is just a lot more effort and time compared to someone in a steady job with a steady income.
What’s more, if you are self-employed, you need to do more work in the sense that you would need to pay closer attention to the fine details of the loan requirements and work closely with them so that you don’t end up making mistakes and making things worse for yourself. In this article, we will take you through how to land yourself with a good housing loan if you are self-employed. All it takes would be to follow these few simple tricks that we are going to list down below.
Get a financial consultant
Before you know about your chances of getting your loan approved, you first need to know what are the numbers and their meanings. In order to learn about the numbers and what their exact meanings are, you first need to get someone who knows the business involved to help you out. Find a trustworthy financial consultant and make sure they teach you what all the numbers mean in the business.
Sit down with your broker or your lender to then learn from them what is the taxable income level you would be required to have before you can apply for a loan or a credit. If not you will be out in the dark and would not know what is the basic requirement to be starting out with. That way, without the knowledge, you are bound to be disappointed. Even with knowing about the business, many self-employed people do not land themselves with a good home loan. So do not underestimate this point and ensure that you know your facts before getting down to the actual work.
Once you have understood what the taxable income level required is, then you can learn about what your borrowing limits are and then approach your lender for a good deal. Before you confirm the deal, you would need to physically prove your buying power by giving evidences for your stated income level. Then your lender would be more suited and convinced to trust you to give you the loan.
Information is key
Information is key and we cannot emphasize this point any more than it is already stated here. When a lender is considering someone who is self-employed to give them a housing loan, the first thing they would expect them to have is the adequate knowledge and understanding about the way the loan works and the market works. Only then would the lender be convinced with the assurance and consistency that would be coming from the applicant. They want to feel confident about their borrower that they have been in a steady business with a good idea about the banking and finance world. Only with knowledge would the trust come around that they would not run away with the money or just waste it on a single business deal.
Having a steady business and being able to prove it
The next thing to show your lender is that you have a steady business running with a monthly profit rolling in smoothly. If you can prove to your lender that your business has been running smoothly then you can subconsciously assure them that you are able to pay them back the amount they have lent out to you within the stated period of time without a problem. It is also important to prove that your monthly profits are equivalent to the stated level of income required for the loan to go through.
Abide by your lender’s requests
To make sure the lender is convinced with your financial status, they might require some documentation from you. This would include at least a past 2-year accounting records of personal tax returns and income or profit profiles from your business. If the lender notices a large gap between the taxable incomes in the two business years, then the lender would try to use the figures to find out which is the lowest value of the two years. Even if this falls into an older statement, it would still be used as your basal level of income. So make sure you have had a consistently running business before you think of applying for a loan as even if your business is currently doing well, you might not land yourself with a good secured loan.