Your guide to personal loans for self-employed people

Written by

Robert Walton

Robert Walton is a Senior Marketing Manager with many years of experience helping brands reach the right customers through clear, informative and straight-to-the-point comms. He's all about delivering top quality customer service and shouting about the great things we do here at Novuna. In his spare time, Robert dabbles with DIY and likes to write about his home improvement tips and tricks.

Wednesday 5th April 2023

If you’re self-employed and wondering if you’re eligible to apply for a personal loan, then this guide’s for you. The good news is that, provided you meet our eligibility criteria, you should be able to apply for a personal loan with Novuna Personal Finance if you’re self-employed. Read on to find out more…

Can I get a loan if I’m self-employed?

Yes. If you meet your lender’s full eligibility criteria, being self-employed shouldn’t hold you back from applying for a loan.

At Novuna Personal Finance, to apply for a loan you must:

  • Be in permanent paid employment, self-employed, or retired with a pension
  • Be aged 21 or over
  • Be a permanent UK resident, and be able to share your address history from the last three years
  • Have an annual income greater than £10,000
  • Have a bank or building society account
  • Have a good credit history
  • Not be planning to use your loan for business purposes

As you can see, there’s nothing stopping you from applying for a loan if you’re self-employed and need to borrow money to help you achieve your personal goals sooner. We offer loans to help you fund a new car, home improvements, a dream wedding and so much more. You won’t be able to use a personal loan for business or investment purposes, though.

Are there any other criteria I need to know about?

Different lenders have different eligibility criteria. But here at Novuna Personal Finance, we don’t need self-employed applicants to earn more than the minimum income criteria required for those working for an employer. We don’t limit the amount of money self-employed applicants are able to borrow, either. As long as you meet our standard eligibility criteria you will be able to apply for a personal loan with us as normal. You can find out more about personal loan eligibility here.

Borrow between £1,000 and £35,000 at low rates from 7.4% APR Representative (£7,500-£25,000), and spread the cost over 2 to 7 years.

Will being self-employed make it less likely I’ll be accepted?

While it’s true that you will be asked to share your employment details and annual income (you may need to retrieve your SA302 tax calculation from your HMRC account), being self-employed shouldn’t have too much of an impact providing you can demonstrate good affordability and a regular, steady stream of income.

Your lender will want to know your income, how much debt you owe compared to the income you have coming in, and your history of managing money to help them understand how likely you are to be able to afford the loan repayments.

If your monthly income won’t cover the monthly repayments comfortably, you already have existing debt taking up most of your disposable income, or you’ve defaulted on your repayments in the past, this tells your lender that you’re likely to be a higher risk.

It’s important to make sure the lending is sustainable for the customer, so it’s in your best interests for lenders to assess your affordability.

Lenders also want to make sure they’ll get their money back (plus interest, which is essentially the cost of borrowing money), and if you’re seen as a risk you may be offered a higher rate – or not offered a loan at all.

How will lenders make a decision on my application?

Unsecured loan providers make a lending decision based on your personal circumstances, credit history, loan amount and term.

Lenders will work with Credit Reference Agencies (CRAs) to help provide a better overview of your financial position and to prove your income matches the amount you declared on your application. You might need to share your bank statements or use open banking to help verify your income.

If you have an irregular income (the amount you’re paid varies each month), your average income over the course of twelve months will be verified which provides a better overall idea of the money you have coming in.

Don’t worry too much if your income varies slightly from month to month. The main thing is you can prove you have a steady stream of income coming in and that you have a good history of managing money. It’s so important to make sure you can demonstrate you’ve responsibly managed debt in the past (for example, regularly paying off credit card debt or experience of paying off a loan with no late or missed payments).

How to get a personal loan if self-employed

Simply apply online and have your details, including your annual income, to hand.

Make sure you have a good credit score if you want to give yourself the best chance of being accepted for a personal loan. There are a few things you can do to improve your credit score, though the most important thing is being able to show you can manage debt well. It’ll stand you in good stead if you can prove you’ve borrowed money but paid it back on time each month.

Are loan rates higher for self-employed people?

The rate you’re offered will depend on a variety of factors but being self-employed doesn’t mean you’ll automatically be offered a higher interest rate.

The rate you’re offered will be based on your financial circumstances and credit history (plus the amount you’ve applied to borrow and over how long). This is because, if it’s more likely you won’t be able to pay back the money you’ve borrowed for whatever reason, lenders need to ensure interest payments cover the risks.

If you are considered a higher risk, you’ll be offered a higher interest rate whether you’re self-employed or not.

What should I do if my application isn’t accepted?

If your personal loan application is declined, it’s important not to dive straight in and apply again elsewhere as each hard credit check is recorded on your file. While other lenders won’t be able to see the outcome of your application, it could be a red flag and prevent you from getting another loan elsewhere.

It’s tempting to review other options such as a secured loan or credit card but, again, if too many hard searches are recorded on your file in quick succession this may have a negative impact on your credit score.

Instead, take stock and asses why your application might have been declined. Review your credit score and see if there are any obvious ways to improve it.

Is it time to apply for a personal loan?

With Novuna Personal Finance, you could borrow from £1,000 to £35,000 and repay it in fixed-rate monthly instalments over 2 to 7 years.

If you think you meet our eligibility criteria, simply fill out our easy online application form. It’ll take minutes to complete and you’ll receive an instant decision – no waiting around in suspense.

Apply for a personal loan now

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Novuna Personal Finance is a brand of Mitsubishi HC Capital UK PLC. Other brands under which we trade include Novuna Consumer Finance, Novuna Vehicle Solutions, Novuna Business Finance and Novuna Business Cash Flow.