How to Make Self Employed Loans Easier to Get

Michelle Tuvey Michelle Tuvey | Loan Underwriter

Self-employed loans are not the easiest kinds of loans to get due to the difficulty of proving income at a level that satisfies the bank. That is not to say it's impossible for self-employed people to get mortgages and secured loans; it's just that they have to work a bit harder. It is what it is. There is no point in complaining about it when there are strategies you can employ to make the process easier.

For the record, the FCA maintains there is no substantial evidence suggesting that lending rules are applied by banks and building societies unfairly where the elderly or self-employed are concerned. There is no reason for us to distrust the regulator in this regard, so it is a matter of the self-employed being proactive about being able to prove their income before they apply for a loan.

Gather All Documentation

The average bank or building society will require documentation of at least three years' earnings as well as tax records. Some may even request to see bank statements that demonstrate ongoing deposits and withdrawals. If your application for a loan is still several years off, the best thing you can do for yourself is to create a system of detailed documentation capable of proving your income.

In the absence of such documentation now, you will have to pull together whatever you have. This may include invoices, tax statements, statements from your accountant, and so on.

Request an SA302 Form

An excellent way to document your annual income is to ask for an SA302 from HMRC. This form proves how much income you have declared in the past for tax purposes. The fact that it is an official government form makes it difficult for lenders to argue with the numbers. You can obtain a form by yourself by calling the tax office or if you have an accountant, have him or her get the form for you.

Along those same lines, you may want to maximise your revenue for tax purposes if your plans to borrow are a year or two in the future. Where most self-employed attempt to minimise their earnings in order to reduce tax liabilities, maximising for just a year or two may make getting self-employed loans a lot easier. The extra tax you pay would be worth it if you could not get a loan otherwise.

Keep Good Monthly Records

Banks and building societies are fully aware that self-employed income is not necessarily as steady as a salary. Yet they still need to know borrowers are properly managing their incomings and outgoings. You can present a more convincing case by keeping meticulous monthly records documenting all of your transactions.

Few things are as impressive to a loan officer as a stack of invoices and receipts detailing your exact financial position. By demonstrating your income and outgoings on a month-to-month basis, you are showing the lender that you know how to handle money.

Part and parcel of keeping good monthly records is making sure you pay your bills on time. Not only do the self-employed have to work harder to prove their income but they also have to be very particular about protecting their credit. The better your credit rating, the better your chances of getting a loan.

Self-employed loans may not be the easiest loan products to get, but they can be had if you are willing to be proactive in preparation for applying. Following the tips we have offered here will put you in the best possible position to obtain either a mortgage or secured loan.

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