Do you wonder if a self-employed individual can get a payday loan? Don’t worry, this article will take you through what you need to know about this.
Remember, there are various loan forms in Ghana you can get to meet your various needs. However, the most important thing is your ability to repay your loan at the due time.
Now, let’s jump into the matter at hand.
Who is a self-employed individual?
A self-employed person can be a freelancer working on many tasks at once while not being legally employed by a corporation. Besides that, the person could be an individual who has recently launched a business. And this business may be a start-up with no solid or fixed revenue.
Because such persons have no certainty of work or income, it may be difficult for them to get a loan. Things might get even worse and more challenging if they have negative credit.
Why do we say so?
Most lenders rely on their borrowers to have a strong credit score. Besides that, they’d want them to provide the collateral the lender will take that over. This happens if the borrower defaults on their loan. Most lenders select this route because it almost eliminates the danger of not being repaid by a borrower.
They regard payday loans as being one of the more straightforward types of loans to get. Especially when compared to traditional loans or loans that require collateral, such as vehicle title loans. Payday loans typically outperform other types of loans in terms of benefits, making them a perfect financial solution for many people.
Good credit ratings show the borrower has a track record of repaying borrowed funds on time. Whereas collateral entirely eliminates the risk of not being reimbursed. This is because they can resell the borrower’s collateral to recoup the cash they granted as a loan. This happens if the borrower cannot repay the loan.
The last resort is for a lender to rely on the income statement of a borrower. This can ensure that the borrower earns an amount on a monthly basis that is enough to repay a loan.
If you don’t meet the first two criteria, getting a loan from a traditional lender is out of the question. This is because they don’t care if you have a steady income or not. Instead, they look at your credit score (which should be good). However, they could require you to offer collateral if you don’t have any credit history.
Bad credit score borrowers may find it challenging to get funding from a typical loan lender in either case.
What Benefits Do Payday Loans Offer Other Loans Don’t?
When applying for a loan with a traditional lender, it’s common knowledge that you’ll need decent credit. Unfortunately, many people do not meet this one criterion (about 11.1 percent of adults in the United States have a credit score of 550 or less), which is why their applications are frequently rejected by lenders. They may have to turn to friends or family for support or to a direct lender offering short-term payday loans. They would do this in order to receive the cash they need for unplanned expenses to get through the month.
For approvals, the various procedures for payday loans go hand in hand.
To begin with, payday loans are a rapid financial solution. Therefore, payday loan companies minimize time-consuming procedures throughout the approval process.
What can be counted as time-taking? CREDIT CHECKS!
Payday loan lenders avoid conducting credit checks in order to save time and fund their borrowers as quickly as possible. Credit checks can take a long time. Because payday lenders do not conduct credit checks, they even fund people with negative credit.
As a result, we may conclude that payday loan providers provide cash to everybody, regardless of their credit score.
What About Collateral?
Processing collateral takes time, which is another reason payday loan providers avoid it.
They don’t ask for collateral for two reasons:
- It takes time.
- They don’t see the sense in going through all the trouble of processing collateral for a loan of a few hundred/thousand cedis or fewer.
So, What DO Payday Lenders Rely Upon?
In order to grant loans to their customers, most payday loan lenders rely on their clients’ income statements. Apart from a few fundamental requirements, such as residing in the state in which they are requesting a loan. And being at least 18 years old, payday loan lenders rely heavily on proof of income.
There should be no difficulty sponsoring someone as long as they can show through their income statement. Or show their payslip that they have a steady source of income.
Does that mean that self-employed people can get payday loans too?
Unfortunately, most payday loan lenders want their borrowers to be employed by a company. This is because it ensures that the borrower will receive their wage, and thus the lender will be repaid.
Even while most direct loan lenders may refuse to lend to self-employed people. If one can show that they have a steady income (based on any future or ongoing initiatives). A payday loan lender may support them.
Even a self-employed person, like everyone else, may submit an income statement. He or she only receives an amount that is directly related to how much he or she earns. Or the amount will earn on the next consecutive payday. It should not be more than around two weeks away.
So, it’s possible to get your self-employed payday loan if you have a steady source of income. They regard payday loans as being one of the more straightforward types of loans to get. It could be the loan you would need as a self-employed person who has a steady source of income. However, you’ll stand a better chance of getting the loan if your credit score is high. This is because some lenders might see you as someone who doesn’t fulfill financial obligations if you have a low credit score.