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Self Cert Loans - Financing For The Self Employed

Aug 17, 2007
Being self employed has many perks, however, securing a loan can be difficult. Lenders see a self employed person as a risk. That is because they do not have a guaranteed paycheck and their income often varies so much that it is hard to pinpoint exactly what their average income is.

Lenders use a persons average income to determine how much they can lend them or even if they can lend them anything. Additionally, the documentation of self employment income is often self kept records that can not be justly verified. All is not lost, though, as there are options for self employed loans.

As mentioned lenders will look at many factors to determine is a person is eligible for a loan. They need a certified record of income. Usually this would be pay stubs, but with a self employed person there are no pay stubs to use as a certified record. Instead the bank will want to see the accounting for the business or past years tax returns.

Another big factor with self employed loans is if they are secured or unsecured. Since self employed people are considered high risk a secured loan is probably the best choice. With a secured loan the self employed person puts up collateral to secure the loan.

Self certification (also know as self cert) loans are not easy to get and they often cost more than a typical loan. Self cert loans charge higher interest rates and can be very difficult for a person to get if they do not have a good credit rating.

That said, if you are self employed and have a less than perfect credit history, all is not lost. Because of the amount of people that encounter credit problems during their lives, the banks and lenders have had to relax their lending criteria in order to service this market.

There are also a number of specialist lenders emerging in order to target this niche area. So for these reasons if you are self employed and have a bad credit history then over the coming years it will be a lot easier to obtain finance.

In recent years, though, more and more people have started working for themselves. Due to this more and more lenders are open to the idea of self employed loans. The interest rates have also come down on them. The best way to get a self cert loan is to be prepared before meeting with the lender.

For a self employed loan a person should have:

- Tax returns for at least the past two years.
- Current accounting records.
- Proof of any additional income.
- Banking statements for past twelve months.
- Copy of business license.
- List of all assets, including bank accounts.
- Current debt information, including creditors names and contact information and mortgage statements.
- Proof of any child support or alimony paid out.
- For adverse or no credit, proof of some revolving credit account, such as rent or utility receipts.

Being prepared and having all of this documentation can be very helpful in securing a self employed loan. They may be hard to find, but with luck a self employed person should be able to find and obtain a loan just like they would if they had typical employment.
About the Author
James Copper writes on all areas of finance. He works for Any Loans who offer Self Cert Loans and Self Cert Mortgages to UK residents.
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