A loan for the self-employed turns into a real problem for many smaller self-employed and freelancers. Because banks are naturally concerned about their security, the larger institutions are therefore more often hesitant with self-employed people – and that even if you are self-employed or as a member of the professions earn much more than a comparable employee.
Find out what to look for in a loan for the self-employed here. After all, a self-employed loan is supposed to help you and improve your financial situation in the long run.
FAQ credit for self-employed
What is a loan for the self-employed?
The peculiarity of lending to the self-employed is that they do not have a fixed monthly income as collateral. Even if their business is currently doing well, there is no assurance that it will stay that way. This makes self-employed lending a little more complicated, and it affects self-employed loan terms.
Good reasons – that's why a loan for the self-employed is doubly worthwhile
Applying for a loan can have many reasons. Workers are also reaching for your dream loan when it comes to larger financing, getting them to real estate, cars or just more financial freedom faster. But a loan for freelancers and self-employed usually comes into play in a completely different way.
This is important
Often it is important work equipment that self-employed people finance with a loan. And that just means not only more fun in private life, but simply the possibility to work better. It can be a new desk, a camera, a complete office equipment, a work van, an expensive espresso machine for catering or a kick start for the marketing campaign – a loan for the self-employed thus becomes the livelihood for the further work.
This makes you continue to be competitive in a competitive market and ensures that you have an easier time continuing to earn money from your job. If you use loans for professional financing, the loan for the self-employed has another advantage for you at once. For work equipment you can of course claim tax deductions and thus plan elsewhere.
If you expect to have to make a larger expenditure in the next few months anyway, a loan can help you to get the desired work equipment faster. And as a self-employed person, you probably know this best: self-employed just means that you work yourself and constantly. Accordingly, business expenses have priority, and it is precisely here that credit financing can simply make more sense than laborious saving.
This is why banks are hesitant to lend to the self-employed
If you work as a freelancer or in self-employment and seek bank advice for a loan, you will encounter several problems. Because the income fluctuations that you know from your self-employed everyday life, of course, also know the banks. An unsteady income is of course nothing you can't live with and you know your profession and work better than anybody else.
So you can plan well around lower-income months and spread your finances gracefully throughout the year. Although you do not bring home the same amount every month, this does not mean that you cannot live better than some employees with your annual income.
For banks, however, this is very important, because your income situation is considered uncertain if you are self-employed. This makes a loan for self-employed always a potential risk for banks. Banks do not want to accept the mere possibility of default or delinquency.
Attention!
Unlike employees, the income of a self-employed person is not considered as collateral and this makes the loan application particularly difficult for many young professionals. Because usually the own income represents the largest security for a potential loan, a bank does not take note of this, so self-employed must be able to show another security. This is often particularly difficult, especially if the loan for self-employed persons is urgently needed, for example, if there was property damage in one's own business.
In addition, banks do not assess all self-employed people in the same way. A doctor or a lawyer has a different standing with banks than a graphic designer or a cafe owner. The competition and the market situation are also decisive for the extent to which a bank is willing to grant a loan.
A loan for freelancers can also be worthwhile because this costs you significantly less than, for example, a dealer loan. If dealers offer you a financing, this runs over their house bank, the conditions are accordingly bad for you. After all, both the dealer and the house bank want to profit from it. In addition, the control of the repayment is extremely inflexible for you.
Tip
Freelancers and self-employed people have the best chances of getting loans if they already have some professional experience and have been working in their industry for at least three years.
Save money on a loan for the self-employed
Tip
If you want to take advantage of a fast and uncomplicated loan as a freelancer or self-employed person, you should consider a few things. In many cases, an earmarked loan can offer you much more favorable conditions. This is the case, for example, with a car loan. The reason for the more favorable conditions lies in the material countervalue.
So if there are defaults, the bank has a material value in case of doubt. This additional bit of security rewards the bank with lower loan interest rates. Otherwise, loans for business purposes are classified as "at the free disposal" just like loans for free purposes.
This free use makes it difficult for banks to calculate what you will spend the loan sum on, whether you will invest it in your business, in real estate, cars or technology, and what the bank would receive in return in the event of a payment default. This means more risk for the bank and more interest for you.
This is why a loan for the self-employed is often unattractive and has worse conditions than loans for employees. Here banks also often talk about an investment loan, which you translate into material value, it is different with a business loan for goods or services. Then the bank refers to it as a working capital loan.
The problem with this, however, is that it is often the working capital loans that you need to apply for quickly as a self-employed person or freelancer. This may be the display of shopping goods you work with, or a much-needed repair. As a self-employed person, you know exactly that you can not afford a loss of earnings in such cases and must remain in the operational business.
Working capital loans allow you to move on quickly and easily and focus on your core business.
Credit without Schufa – an alternative for the self-employed?
Another problem that many self-employed people face when applying for credit is Schufa. This credit score provides an indication of how people have handled debts and contracts in the past. The exact methods of Schufa are deliberately kept unclear to prevent manipulation.
In principle, the credit check is nothing bad, but it often has a decisive disadvantage for you when applying for credit. Either loans are denied to you altogether, or the banks give you the loans only at much worse conditions.