Are you someone who just gave up their regular job to work as a freelancer? There are going to be many changes in your life, including the fact that now you will be your own boss. What else is going to change is how you apply for a personal loan. You may not have considered this situation when you decided to start freelancing, but you will be consider a “self-employed” individual for the purpose of loan applications.
Things That Lenders Consider When You Apply for a Personal Loan as a Freelancer
- Your financial standing
First, when you become a freelancer, the loan eligibility criteria of a salaried individual doesn’t apply to you anymore. You will now have to meet the criteria that applies to self-employed individuals.
Take a look at the documents you will need to apply for a personal loan as a freelancer:
- A copy of NRIC
- Last two years’ Income Tax Notice of Assessment
Lenders need your Income Tax documents to assess your financial standing and to verify your earnings in the past years. So, if you have just started as a freelancer, or if you have been doing it for a while, make sure you file your Income Tax return every year.
Taking care of your credit score becomes even more important when you are self-employed. If you already have some outstanding loans, make sure you are repaying them on time to avoid any damages to your credit score. Check your credit score regularly and take steps to improve it. Good credit score will increase your chances of getting the loan approved.
Your lenders want to know how stable your income is. If you don’t have last two years’ Income Tax Notice of Assessment, get some proof, like a list of your clients, which shows you will be earning enough income to repay the loan.
What Can You Do to Get Your Loan Approved?
The fact: If you don’t meet the eligibility criteria, there’s nothing much you can do. Making voluntary contributions to the CPF account will also not help as lenders would not even ask you for CPF documents, as you are now a self-employed individual. However, there are some things you can do to get your loan approved. Check them out:
- Get a guarantor: After all, banks want to make sure that their money is safe. If you can get someone to act as your guarantor, lenders could approve your loan.
- Collateral loan: The reason why lenders are so strict with the eligibility requirement is mostly because personal loans are unsecured loans. So, putting up an asset as a collateral for the loan could improve the chances of your loan getting approved.
- Registered moneylenders: Compared to the banks, the registered moneylenders have minimum documentation requirement for loans. However, keep in mind that borrowing from these moneylenders could be costlier than borrowing from banks.
Think Long Term
If you plan to continue freelancing, you need to think long term. Even if you don’t a loan today, you might need it at some point in the future. Make sure you file your Income Tax return every year. Also, if you have a credit card or any other type of loan, keep an eye on your repayments to avoid hurting your credit score.