Being your own boss can be rewarding, but borrowing money can sometimes be a little more complicated. Self-employed applicants may face stricter requirements because lenders often want more evidence of income and financial stability.
That doesn’t mean getting a personal loan is out of reach. The process may look slightly different, but Savvy can help connect you with lenders that consider self-employed borrowers and find options suited to your circumstances.
What is a self-employed personal loan?
A self-employed personal loan isn’t a specific loan product, but rather refers to personal loans available to people who work for themselves, such as sole traders, freelancers, contractors and business owners.
Because self-employed income can be less regular and isn’t usually shown through standard payslips, lenders may ask for different or additional evidence of what you earn. This can affect the type of loan you qualify for, how much you can borrow and the interest rate you’re offered.
Depending on your circumstances and the documents you can provide, your options may include:
Standard personal loan
A standard personal loan will usually be the first option if you can meet the lender’s normal income and documentation requirements. If you’ve been trading for a while and can show a reliable income through your financial records, you may be able to qualify in much the same way as a PAYG borrower.
Low doc personal loan
If you can’t provide the usual income documents, you might need to look at low doc loan options. Instead, the lender may accept alternative evidence such as an accountant’s letter, although these loans can come with higher interest rates or stricter conditions than a standard full doc loan.
Why might a self-employed personal loan cost more?
Self-employed personal loans often cost more because lenders may see self-employed income as less predictable than PAYG income, particularly when earnings vary or are harder to verify.
That doesn’t mean being self-employed automatically means paying more. If you can provide full financial records and show a consistent income, you may still qualify for a standard personal loan and competitive rates.
However, if you can’t, you may face:
- Higher interest rates
- Lower borrowing limits
- Additional fees
This is especially the case with low doc personal loans.
Income isn’t the only factor lenders assess. Your credit score also plays a key role in determining your eligibility and the interest rate you're offered. The higher your credit score, the more confidence a lender will have in your ability to repay the loan.
Because lenders have less conventional evidence to assess your earnings, these loans often come with higher rates and, in some cases, extra fees compared with a standard full doc loan.
For example, if a self-employed borrower can provide the standard financial documents and qualifies for a full doc loan at 7% p.a., a $30,000 loan over five years would cost around $5,642 in interest. If they can’t provide those documents and instead qualify for a low doc loan with a hypothetical rate of 10% p.a., they’d pay about $8,245 in interest, more than $2,600 extra.
You can use our personal loan repayment calculator to see how different rates could affect your repayments and total interest.
Income isn’t the only factor lenders assess. Your credit score also plays a key role in determining your eligibility and the interest rate you're offered. The higher your credit score, the more confidence a lender will have in your ability to repay the loan.
What documents do you need as a self-employed borrower?
As a self-employed applicant, you’ll typically need to provide more paperwork than someone who is PAYG-employed, as lenders will want to verify your income and assess your ability to manage repayments.
As well as standard personal loan documentation like government-issued ID, lenders will also request the following documentation:
- Recent tax returns
- ATO-issued notice of assessment
- Business and personal bank account statements
In most cases, lenders also expect your ABN to have been active for at least 12 months. The more history and financial records you can show, the better your chances of approval.
If you’re newly self-employed or can’t provide this documentation, a low doc allows you to submit alternative proof of income, such as:
- A signed income declaration
- An accountant’s letter
- BAS
- Evidence of GST registration
- Your ABN
How long do I have to be self-employed to get a personal loan?
Lender requirements vary, but you’ll generally need some trading history before you can qualify for a personal loan. Some lenders may accept self-employed applicants after 12 months, while others can require two years of business history and financial records.
The longer you’ve been self-employed, the more evidence you’ll usually have to show that your income is stable and sustainable. This can make it easier for a lender to assess your application.
If you’ve only recently started working for yourself, your options may be more limited because some lenders simply won’t accept applicants who haven’t met their minimum time-in-business requirement.
Should I use a personal loan or business loan if I’m self-employed?
Being self-employed doesn’t automatically mean you need a business loan. The better option largely comes down to what you need the money for.
A personal loan can suit personal expenses such as a holiday, medical treatment, home renovations or debt consolidation. Depending on the lender, it may also be possible to use one for some business expenses.
A business loan, on the other hand, is specifically designed for business purposes. This could include buying equipment or stock, managing cash flow, hiring staff or funding growth. It can also give you access to much higher borrowing limits.
| Personal loan | Business loan | |
|---|---|---|
|
Purpose
|
Flexible, all-purpose funding
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Business use only
|
|
Loan amount
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Up to $75,000 unsecured, up to $100,000 or more secured
|
Up to $500,000 or more
|
|
Loan term
|
1 – 7 years
|
1 – 30 years
|
|
Interest rates
|
Often higher, especially for low doc applicants
|
Can be lower for established businesses
|
|
Security
|
Can be secured or unsecured
|
Can be secured or unsecured
|
|
Eligibility
|
Based on personal income and credit
|
Based on business income, trading history and business and personal credit
|
Self-employed borrowers who don’t have a full set of business financials may also be able to consider a low doc business loan, which can accept alternative evidence such as business bank statements or an accountant’s letter.
How to apply for a self-employed personal loan with Savvy
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Complete our online form
Tell us about yourself, your work and income, and the loan you’re looking for.
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Provide your documents
Upload the financial documents we need through our secure online portal.
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Get matched with a lender
We’ll compare options from our lender panel and look for finance that suits your circumstances.
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Submit your application
Once you’re happy with the finance deal, we’ll prepare and submit your application to the lender.
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Receive your funds
If approved, we’ll help finalise settlement and the funds will be transferred to you.
Why apply for a personal loan with Savvy?
Tips to get a better deal on your self-employed personal loan
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Keep your financial records up to date
Clear, recent tax returns, BAS and bank statements can make it easier for a lender to understand your income and may strengthen your application.
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Work on your credit score
Paying bills and existing debts on time, reducing unused credit limits and avoiding unnecessary new applications can all help improve your credit profile.
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Build a consistent income history
The longer you’ve been self-employed and the more stable your earnings are, the easier it can be for lenders to assess your ability to repay the loan.
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Borrow only what you need
Asking for a smaller amount can make the repayments easier to manage and may improve your chances of approval, while also reducing the interest you pay.
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Compare your options
Lenders assess self-employed borrowers differently, so the rate and loan amount available to you can vary considerably. Comparing suitable lenders can help you avoid paying more than you need to.
