Employees who have a fixed and regular income will get a loan without much fuss. However, it looks different if it is a loan for freelancers. Although they have an income, this varies from month to month.
In a few months there may also be a slump in orders, so that even less will be earned. This fact discourages many banks when it comes to a freelance loan. Collateral is always the top priority for banks, and those who cannot provide it fall through the cracks and get no loans. Nevertheless, there is also the possibility to take out a loan for freelancers.
Who is classified as a freelancer?
At banks, what job is always important. Freelancers are also doctors who also need a loan. If a doctor wants to open a practice or wants to expand it, this is always associated with costs. Doctors not only enjoy a high reputation among patients, banks see very good customers in this professional group. Therefore, when it comes to a freelance loan, they have no problems to fear. They have a high income and their creditworthiness is very good. The creditworthiness is very important when lending, because it says whether someone can repay a loan or not.
Doctors can ask their own bank for a loan, or they can ask special doctor or pharmacist banks that give a loan to freelancers. But lawyers and those who have their own business can also work as freelancers. This shows that the bank’s fears are often unfounded.
What documents does the bank need?
Freelancers can show their income using the profit and loss account. In addition, the income tax records, the account statements and the Credit Bureau are checked. The fewer entries in the Credit Bureau, the better the credit rating. To improve bad credit, the borrower can provide other collateral to convince the bank to grant a loan.
One of the most common types of collateral is a surety and capital life insurance. It is sufficient if the guarantor has a fixed income that does not come from a freelance job. The insurance is only accepted as security if the surrender value is at least 5,000 dollars.