More and more people are leaving corporate positions and embracing the freedom of the self-employed lifestyle.
However, self-employment can be financially challenging, especially at the outset. If you’re working for yourself, you may struggle to make ends meet from time to time.
In fact, plenty of self-employed individuals seek out fast-cash financing options, such as payday loans.
Payday loans are still available to you even if you don’t receive a regular paycheck from an employer! In this post, we discuss the ins and outs of payday loans for self-employed individuals.
What Is a Payday Loan?
Payday loans are short-term loans available to consumers. They are technically installment loans, but they have far shorter repayment terms than traditional personal loans.
In fact, they’re designed to help smooth things over between paychecks.
Sometimes it can be difficult to make one paycheck stretch until the next one. This is especially the case if you are currently facing unexpected costs, such as medical bills. You may also receive paychecks irregularly, or only once a month.
Payday loan instant approval lenders will generally grant borrowers funds equal to the amount of their next paycheck. Borrowers must pay this amount back, plus interest, on the date of their next paycheck.
It can be incredibly easy to secure a payday loan. Plenty of payday lenders don’t require borrowers to provide credit history. You can easily request a payday loan if you have bad credit (or nonexistent credit)!
However, it’s important to note that most payday loans have high-interest rates (APRs). Some loans may have APRs as high as 400%.
This is because payday loans are considered high-risk loans. Borrowers may be at greater risk of defaulting, so lenders want to take precautions to ensure they don’t lose money.
That being said, payday loans are incredibly popular. 10-12 million Americans take advantage of them every year.
Payday Loans for Self-Employed Individuals
So how do payday loans online work for self-employed people? After all, self-employed individuals do not work for a traditional employer. They may also be unaccustomed to regular “paychecks.”
The good news is that you can be self-employed and request a payday loan. Plenty of lenders require only that you provide proof of some sort of regular income when requesting a payday loan. This income could even be social security checks!
You will also have to provide an eligible bank account in order to receive your payday loan via direct deposit.
Proof of Income
What counts as proof of income when you’re self-employed?
Proof of income can take the form of recent invoices you’ve delivered to clients. It’s okay if these are irregular, as long as they were sent within the last several months.
It could also take the form of receipts for cash transactions if you’re paid in cash. If you regularly receive payment via Venmo or PayPal, you can also provide records of those transactions as proof of income.
Some lenders may also ask borrowers to provide a bank statement showing regular deposits. For this reason, we strongly recommend that you have a checking account of some kind.
Because self-employed income is often irregular–or even infrequent–make sure you have a few months’ proof of income before requesting a payday loan.
This can be essential for simply getting payday loan approval. It can show lenders that you have the means to pay back the loan in full.
It’s also important for your own planning purposes. Smart borrowers will always make sure they can meet repayment terms before securing a loan!
What counts as your payback date when you’re self-employed? After all, you may not know the definitive date of your next “paycheck.”
Generally, payday loans have very short repayment periods. Some lenders automatically require borrowers to pay their loans back within two weeks, for example.
For now, anticipate a repayment period of 2-4 weeks. This may be negotiable depending on the lender, especially if you clarify that you are self-employed.
Be absolutely certain that you can pay your loan back in full (with interest!) within this time period. Be prepared for stricter repayment terms, such as twice-a-week payments.
Requesting a payday loan can impact your credit score–either positively or negatively, depending on how you manage repayment.
Be extra careful of this if you are self-employed. You may be needing future financing, such as a business loan. It’s important to keep your credit score intact to ensure low rates and approval.
Seek out payday loan no credit check lenders that perform “soft” rather than “hard” credit checks on your application. This will ensure you don’t lose precious credit points.
Do everything you can to avoid missed payments. Missing payments on a high-risk payday loan can be detrimental to your credit history and score.
Before you start submitting payday loan applications, keep these tips in mind.
1. Get Your Documents in Order Before Applying
Assemble your proof of income before you reach out to payday lenders. Ideally, self-employed individuals should gather three months’ worth of income proof before requesting payday loans.
It’s also important to have bank statements on hand to indicate regular deposits and/or transactions.
2. Research Lenders Wisely
Some lenders may not accept applications from self-employed individuals. Others, however, may cater to people who are not traditionally employed.
For this reason, do your research wisely before applying. Identify lender terms and application requirements before requesting a loan. And make sure to avoid hard credit check applications!
3. Consider Alternative Options
When you’re self-employed, you quickly become accustomed to fluctuating income. If you are anxious about high APRs and your ability to repay a bad credit loan guaranteed approval, there are other options.
For example, you may be interested in personal installment loans that have longer repayment periods. These may help you build credit quickly. Plus, they may have lower interest rates and more comfortable installments.
Credit cards can also help, depending on your financial needs.
Final Thoughts: Payday Loans for Self-Employed Workers
Now you know everything about payday loans for self-employed individuals. What comes next?
We always recommend researching payday loan lenders before you make a move. Read our tips on choosing the appropriate lender here.