With diverse loans being pioneered in every walk of life in order to support individuals who find it difficult to meet financial responsibilities, it became crucial to create loans for the affluent too. It is possible that people who seem rather well-heeled may also face trying economic situations, just like you and me. After all when a financial crunch arises, it doesn't do so by studying your bank account. These loans that cater to the self employed, sole proprietors, autonomous businessmen, independent contractors and consultants are called Self Employed Loans.



Unlike employees, who work in an organisation, where they can easily depend on their managers for their monthly paycheques; self employed individuals have nowhere to go in case something goes wrong. Earlier, it was very difficult for such individuals to borrow money from the market as they had no proof of guaranteed income and no one to assure lenders of their repayment too. Hence, the self employed were declined loans very often. With the number of the self employed increasing by the day, lenders chose to use this to their advantage and so emerged with Self Employed Loans.

Self employed Loans are modified to make them more affordable and available. These are a few of their properties:

• Self employed loans are meant for those individuals who control businesses either as sole proprietors or in partnerships, when they face financial crises or even to help build or expand an existing business.

• Self employed loans usually grant amounts ranging from £3000 to £250,000. This range can climb with high-value collateral or security like a house, automobile, bank account, etc.

• The loan term for such loans varies from 10 – 30 years.

• The average interest rates for self employed loans being 17.5%, the range varies between 10.9% and 27.60%. Once again, offering high-valued collateral or a reputable repaying capacity can lower this rate.

• Additionally, to lower the risk factor, Self employed loans require borrowers to make a down payment to initiate the loan proceedings. This payment may be 20 to 40% of the loan amount.

• The advantage of Self employed loans is that they do not require a credit check, allowing those with bad credit to avail them too.

Self employed loans too, can be secured and unsecured. Like any secured loan, Self employed secured loans require collateral. This is why they have lower interest rates, extended loan terms, larger loan amounts and reasonable credit requirements. In contrast, Self employed unsecured loans are more expensive, with less flexible options because of the absence of security.

To encourage these loans further, lenders have provided them with less stringent repayment terms too.

• Underpayment: Here, borrowers pay amounts that are smaller than what is actually expected according to the repayment installment due. This can be opted for when their profit margin goes below average.

• Overpayment: With this option, borrowers pay amounts higher than what is expected, owing to a large profit gained that month.

• Payment holiday: Borrowers can skip a monthly installment, if the profit margin recedes greatly. This option is allowed only if a borrower has shown excellent and prompt repayments in the past.

Self employed loans are very risky for lenders. They reassure themselves of repayment by thoroughly evaluating their borrower's financial past by:

• Self certification: Here, a borrower himself presents his income details. Such loans are classified as separate loans altogether, called Low Doc Loans as they do not require any documentation or proof.

• Audited accounts: This process requires an accountant or a certain authority to verify your income details like complete financial documentation such as payslips or tax returns.

Self Employed Loans are ideal solutions that can serve as a financial backing and also can provide borrowers with additional income required to continue or expand a business. These loans being affordable and easily available have helped create opportunity where none existed.