Personal Loans for Self-Employed Workers

Being your own boss can be rewarding, but how does it work when you want to borrow money? As a self-employed worker, you may face stricter requirements when applying for personal loans. However, while the application process might look a little different, it's still possible to get the finance you need. Savvy can help streamline the process, connecting you with lenders that can offer you competitive loan options tailored to your circumstances.

How do self-employed personal loans differ from regular personal loans?

You may still qualify for a standard personal loan as a sole trader, freelancer or contractor – especially if you’ve been trading for a while and can show a reliable income with solid financial records – but the application process is typically more complex.

This is because lenders may see your income as less predictable than a salaried employee, making it harder for them to assess your ability to repay the loan. As a result, you may face:

• Higher interest rates
• Lower borrowing limits
• More documentation requirements
• Additional fees

Lenders will still want to see that you can comfortably manage your repayments. In place of payslips, you’ll usually need to provide recent tax returns, business activity statements (BAS) or business bank account records to demonstrate your earnings.

If you can’t supply these documents, another option might be a low doc personal loan. This is a type of personal loan designed for borrowers who can’t provide the usual documentation, instead allowing you to apply with alternative proof of income, like an accountant’s letter. However, while you may stand a greater chance of approval, they generally come with higher interest rates and stricter conditions than a standard ‘full doc’ personal loan. Here's an example of how that higher interest rate could impact your repayment amount:

How long do I have to be self-employed to get a personal loan?

Most lenders prefer you to have been self-employed for at least 12 months before applying for a personal loan. This gives them enough financial history to assess your income and stability.

Some lenders may require two full years of tax returns, particularly if you’re applying for a larger loan or want access to lower rates. The longer you’ve been self-employed – and the more consistent your income – the better your chances of approval.

If your income fluctuates a lot or your business is still in its early stages, they may view your application as higher risk.

Is a personal loan or business loan better for self-employed people?

If you’re running a business, you may be eligible for an unsecured business loan. These loans are designed specifically for business use, with higher borrowing limits than a personal loan. However, they must be used for business-related expenses only, such as equipment, stock or cash flow.

While both personal and business loans could give you access to the funds you need, they serve different purposes. Here’s how they compare:

The right choice depends on your needs and circumstances. A personal loan may be the better option if you're borrowing a smaller amount, want flexibility in how the funds are used or don’t have an extensive business history. On the other hand, a business loan is more suitable if the funds will be used strictly for business purposes and you need access to a larger amount. As with personal loans, you may be eligible for a low doc business loan if you lack the necessary financial records.

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

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. It’s important to monitor your credit file and take steps to improve your score, for example by paying off outstanding debts, making repayments on time and reducing credit card limits where possible.

Types of personal loans

Unsecured personal loans

With an unsecured personal loan, you can potentially borrow as much as $75,000 without the need to attach any valuable assets, such as your car, as security. These loans are the most widely available and often the quickest, with same-day approval possible.

Secured personal loans

Secured personal loans, on the other hand, make use of collateral. This lowers your risk profile in the eyes of a lender, potentially lowering your interest rate and expanding your borrowing power beyond what you may be able to get through an unsecured loan.

Fixed rate personal loans

Fixed interest rates are locked at the beginning of your loan and remain constant throughout your repayments. This acts as a valuable protection against interest rate increases, as your loan will be unaffected, but you’ll miss out on potential drops as well.

Variable rate personal loans

Variable interest rates remain open to fluctuation during your term. This means you can benefit from decreasing rates and save on your loan if the market heads in that direction, although you’ll also pay more if rates start rising.

Debt consolidation loans

If you’re paying off multiple debts at the moment, particularly those with high interest (such as credit card debts), consolidating them into one payment can make them more convenient to manage and save you money.

Joint personal loans

Many lenders will give you the option to apply jointly with a partner. Doing so can boost your chances of approval, given that your loan will be serviced by two incomes instead of one. It may also be convenient for covering shared expenses.

Self-employed personal loans

Personal loans aren’t limited to PAYG employees. If you’re running your own business, you can still be approved by submitting tax returns and other business financials instead of payslips and utilise your funds however you wish.