Self-employed personal loans

Personal loans for self-employed people

If you’re self-employed, you can still be approved for a personal loan, but you may need to jump some extra hurdles to show you have sufficient income. 

Unlike salaried workers, who can provide payslips to verify their earnings, self-employed borrowers often need to supply alternative documents. Because lenders assess income using these alternative documents, these loans are often referred to as low-doc personal loans.

The lack of certainty about a borrower’s income stability and ability to repay makes these loans riskier than standard ones, and for this reason, not all lenders offer them. If they do, they may charge higher interest rates or fees than a standard personal loan. 

How do low-doc personal loans for the self-employed work?

Low-doc personal loans work much like standard personal loans. You borrow a fixed amount from a lender and repay it over time, usually over one to seven years (known as the loan term). The loan can be secured or unsecured (the table above displays unsecured loan options), and you’ll pay interest and fees.

The key difference from a traditional personal loan is how lenders verify your income. Instead of payslips, you provide documents such as bank statements, tax returns, or ATO notices of assessment so the lender can assess your ability to repay the loan.

Who can apply for a low-doc personal loan?

Low-doc loans are typically for self-employed people such as sole traders, freelancers, contractors and small business owners.

Eligibility criteria may vary, but in general, you’ll need to be at least 18 years old, be an Australian resident, and be able to show that you can afford the repayments.

Lenders will also assess your credit history, income stability and overall financial position before approving your application.

What can you use a low-doc loan for?

You may use a low-doc personal loan for a range of personal expenses such as:

• Paying for a wedding
• Taking a holiday
• Renovating your home
• Consolidating debt 
• Cover unexpected expenses, such as a medical bill

Some specialist lenders may permit limited business-related use but you must confirm with the lender before applying.

What are the pros and cons of low-doc personal loans?

Low-doc personal loans have both advantages and disadvantages depending on your situation. It’s important to weigh your options carefully before making a decision.

Pros

• A low-doc loan allows you to access credit without standard income proofs, such as payslips
• You can use the funds for a wide range of personal needs
• You can get secured or unsecured loan options depending on the lender

Cons

• These loans are considered riskier, and may come with higher interest rates or fees than standard personal loans
• Not all lenders offer low-doc loans
• You may need to provide additional financial documents to prove your income

How can I compare personal loans if I’m self-employed?

You can compare a wide range of self-employed personal loans from our Online Partners by using the comparison tool at the top of this page. Alternatively, give us details on your ideal loan, link your credit score, and we’ll help you find options you might be eligible for. 

When comparing low-doc loans, key points to consider include:

Fixed or variable interest rate: If you choose a fixed rate loan, your interest rate and repayments stay the same over the life of the loan. A variable rate means the interest rate can change and your repayments may go up or down.

Fees and other charges: Remember to check the fees charged on a loan, as a low interest rate can still result in a higher overall cost if fees are high. You can check the comparison rate that includes the interest rate and most upfront and ongoing fees to get a clearer picture of the loan’s total annual cost.

The loan duration: A longer loan term can mean lower repayments but you may end up paying more interest in total.

What documents are needed: Eligibility criteria for low-doc loans may vary from lender to lender, so it can help to check what documents you may need before applying and whether you can provide them.

How do I apply for a personal loan if I am self-employed?

If a lender allows self-employed applicants, you can usually follow a similar application process to applying for a standard personal loan. You can start the application online, or even apply over the phone or in-branch with some lenders.

As part of the application, the lender will typically ask for details about your self-employment and income. In general, you may need to provide:

• Proof of identity, such as a driver’s licence or passport
• Proof of income, such as tax returns or ATO notices of assessment
• Financial statements, including bank statements
• Business records, such as Business Activity Statements (BAS) if applicable
• Details of your expenses and existing debts

Depending on the lender and your circumstances, you may need to provide additional financial documents to show your income and expenses, including mortgage or other loan repayments, and your overall business income and expenditure. All business-related documents will usually need to show your full name and Australian Business Number (ABN).

Check with your lender to confirm what documents are required and how they should be verified and submitted with your application.

How can I improve my chances of getting a personal loan as a self-employed person?

While there’s no guaranteed way to get your loan approved, there are a few steps you can take to improve your chances.

• Maintain a strong credit score: Lenders often reserve their best rates for borrowers with higher credit scores. A strong credit profile can signal lower risk to lenders compared to a history of missed payments or defaults.
• Apply with a guarantor: If someone in your family can act as a guarantor, it may help reduce the lender’s risk and improve your chances of approval or a lower rate.
• Consider a secured loan: These loans are less risky for lenders because they are backed by an asset. If you fail to repay, the lender may be able to claim the asset. As a result, secured loans often come with lower interest rates than unsecured loans.

Apply for a smaller amount if possible: Larger loan amounts carry higher risk for lenders, so reducing the amount you apply for may improve your approval chances.