Payday Loans for the Self-EmployedA self-employed individual can be a freelancer working on multiple different projects all at once, but without being officially employed by a company, or an individual who has just started a business of his own that may be a start-up without any stable or fixed income.

Since such individuals do not have any guarantee of work and income, they may find it difficult to get a loan in general.

If they have bad credit, things can get even worse and more difficult.

Why do we say so?

Majority lenders rely on their borrowers either having a good credit score, or being able to offer collateral which shall be taken over by the lender in case the borrower fails to repay their loan. This almost completely avoids the risk of not being repaid by a borrower, and most lenders choose to take this path.

Payday loans are known to be amongst the easier kinds of loans to get, especially when compared to traditional loans or loans that need collateral such as car title loans. The benefits that payday loans offer usually out-do the ones that come with other kinds of loans, making payday loans an ideal financial solution for many.

Good credit scores imply that the borrower has a history of returning borrowed funds and on time, whereas collateral completely eliminates any risk of not being repaid since the collateral offered by the borrower can be re-sold to earn back the finances given as a loan to him/ her in case he/ she fails to repay the loan.

The last resort is for a lender to rely on the income statement of a borrower, since that can ensure that the borrower earns an amount on a monthly basis that is enough to be able to repay a loan.

However, if one does not meet the former two points, getting a loan from a traditional loan lender is simply out of the question since these lenders do not bother about whether one does have a stable income or not, and instead depends on their credit score (which should be good credit) or them having collateral to offer in case they have no credit history.

Bad credit score holders may either way find it difficult to get funded by a traditional loan lender.

What Benefits Do Payday Loans Offer that Other Loans Don’t?

When you apply for a loan with a traditional lender, it is widely known that you will have to have good credit. Unfortunately, a huge number of people do not meet this one specific criterium (about 11.1% adults in the United States have a credit score of 550 or less) which is why applications by them are usually turned down by their lenders. In order to get the little cash that they may need for an emergency or to get through the month, they may have to either turn to friends or family for help, or to a direct lender offering short-term payday loans.

The various procedures of payday loans go hand in hand when it comes to approvals.

First and foremost, payday loans are meant to be a quick financial solution, which is why payday loan lenders avoid going through time-taking procedures during their approval process.

What can be counted as time-taking? CREDIT CHECKS!

In order to save time and fund their borrowers as fast as they possibly can, payday loan lenders avoid conducting credit checks since credit checks can take up quite a while. Since they do not conduct credit checks, even bad credit holders get the chance to get funded by their lenders offering payday loans.

So, now we can conclude that payday loan lenders offer cash to everybody irrespective of their credit ratings.

What About Collateral?

Processing collateral can also take up quite some time, which is why payday loan lenders avoid that too. They do not ask for collateral for two reasons- one, it is time-consuming and two, they see no point in having to go through all the hassle of processing collateral just for a loan of say a thousand dollars or less.

So, What DO Payday Lenders Rely Upon Afterall?

What most payday loan lenders depend upon in order to provide loans to their borrowers, are their borrowers income statements. Apart from the few basic criteria that they ask their borrowers to meet including residing in the state they may be applying for a loan in, as well as being at least 18 years of age, payday loan lenders majorly rely on one’s proof of income.

As long as one can prove through their income statement or pay stub that they indeed do have a stable source of income, there should be no problem with funding them.

Does that mean that self-employed people can get payday loans too?

Unfortunately, majority payday loan lenders prefer their borrowers to be employed by a company, since that guarantees that their borrower will receive their salary which in turn guarantees that the lender will be repaid.

However, even though most direct loan lenders may choose not to offer loans to those who are self-employed, if one can prove that they indeed do have a stable income even if they claim to be self-employed (depending on any future or on-going projects that they may have), there is a chance of getting funded by a payday loan lender.

However, just like everybody else who may offer an income statement instead, even a self-employed individual will receive only an amount that is directly related to how much he/ she earns or is bound to earn on the next consecutive pay date, which shouldn’t be more than about 2 weeks away.

Leave a Reply

Your email address will not be published. Required fields are marked *