How to Apply for a Personal Loan if You’re Self-Employed - NerdWallet (2024)

Qualifying for a personal loan can be a bit complicated if you’re self-employed. Lenders may ask for documents proving your income, which typically means providing W-2s. If you’re self-employed, you don’t have W-2s.

Still, applying for a personal loan if you’re self-employed is possible. You’ll just need to have different documents ready to send if the lender asks for them.

Being self-employed doesn’t have much impact on the process of applying for a personal loan. What’s different is the documents you’ll submit to prove you earn enough income to repay the loan.

A personal loan application typically requires:

Some lenders allow you to pre-qualify for a personal loan, meaning you can see your potential loan rate and terms without a hard credit inquiry. That can spare you a temporary ding to your credit score while you weigh your options.

How to prove self-employment income

Have these documents on hand to prove your self-employment income:

Not all lenders ask for proof of income, but it pays to be prepared, especially if you make money from more than one source, like contract or freelance work for multiple clients.

Other forms of income lenders accept

Lenders often consider other sources of regular income such as:

Include all your income sources on a loan application to increase your likelihood of approval.

The following lenders accept documents such as tax returns, 1099s and bank statements as proof of income from self-employed loan applicants.

Self-employed individuals can find themselves at a disadvantage if they can’t show lenders sufficient proof of income.

Sometimes, this is because income can fluctuate when you work for yourself, which means your recent bank statements may not be representative of your annual income. Claiming many business expenses can also lower your taxable income, which may be a barrier to qualifying for a personal loan.

If you can’t prove that your income is high enough to qualify for a personal loan, consider adding a co-signer or putting down collateral to strengthen your loan application.

Co-signed loans

Adding a co-signer can boost a personal loan application, because it provides the lender with an additional person who’s legally obligated to repay the loan if you’re not able to make payments.

Choose a co-signer with stable income, a low debt-to-income ratio and a high credit score. A co-signer with a strong financial profile may even help you get a lower annual percentage rate than if you tried to get the loan on your own.

Not all lenders allow co-signers, but some offer joint loans where both individuals get access to the money and are responsible for making payments.

Secured loans

Some lenders offer secured loans, which requires the borrower to pledge something of value that they own — usually a car or savings account — as collateral. You may have a better chance of qualifying for a secured loan than an unsecured one, because lenders know they can take the collateral if you stop making loan payments.

If you don't qualify for a personal loan, there may be other options available for you to get the money you need.

Small business financing

Credit card cash advance

There is no application process to get a cash advance from your credit card, so no proof of income will be required to borrow up to a few thousand dollars. However, credit card cash advances may come with cash advance fees and bank or ATM fees. APRs on cash advances are also typically higher than the rate you’d pay on credit card purchases.

Home equity financing

If you’re a homeowner, you might be able to borrow against your home’s equity, which is its value minus what you owe on the mortgage. It can be easier to qualify for a home equity loan or home equity line of credit, because your home serves as collateral. However, the lender could foreclose on your home if you don’t make payments on time.

Loans from family or friends

Though it may be uncomfortable to ask people you know for money, a loan from a family member or friend can be a quick, low-cost borrowing option that doesn’t require proof of income. Make sure both parties agree to a repayment plan, put it in writing, and get it signed and notarized.