Self-Employed Loans In South Africa explained
South Africa’s lenders typically ask their borrowers to provide them with payslips, proof of a regular monthly income, and evidence of residence. Due to this, it can be quite difficult and sometimes impossible for self-employed people to qualify for any type of loan.
Lenders prefer employees because they are considered lower risk. Therefore, it is more likely that individuals with a job or regular income will be able to repay a loan than those without jobs or regular income.
The good news is, South Africans can still qualify for a loan, even if they write their own paychecks. This article provides guidance on how to find the best loans for the self-employed, regardless of whether you run your own business or are a freelancer, contract worker, or sole trader.
How does a personal loan for self-employed people work
You may be eligible for either a secured or unsecured loan as a self-employed person. The main difference between the two is that a secured loan involves providing collateral. Alternatively, an unsecured loan does not require any security, but the interest rate is typically higher.
Self-employed loans have the following characteristics:
- The loans have flexible payment terms, from 6 up to 72 months; the monthly repayment schedule of your loan can be set according to your budget.
- You can borrow an amount that ranges from R2 000 to R300 000: Credit providers typically consider your income history when determining how much you can afford.
- The interest rates are customized according to your personal risk profile: If you have already established a good credit score, you will be able to get a lower interest rate.
- The application process is straightforward: Online applications are typically approved without requiring you to visit the lender’s office.
What type of loans are available for self-employed people
If you are self-employed, you can choose between a secured and an unsecured loan. Personal loans in South Africa usually require the lender to check your credit history before issuing the loan amount.
You can take out this loan to purchase your dream home even if you do not hold a formal job. The lender will conduct a thorough assessment of your finances in order to determine whether you can afford such a loan.
- Self-employed loans fast payout
These types of loans are obtained online. There is no lengthy documentation to fill out The lender usually only needs proof of income to confirm your ability to pay back the loan.
Prospective applicants can get a secured or unsecured car loan if you need to finance your vehicle.
What are the requirements for taking out self-employed loans
Whenever you apply for a loan as a self-employed person, it is imperative to show the lender that you will be able to repay the loan. You may need to meet the following requirements in order to apply for such a loan:
Personal loans for the self-employed
Self-employed individuals who need a loan might need to provide and meet the following requirements.
- Prospective applicants must have a valid South African bank account that receives a regular income;
- Applicants should have a valid South African ID;
- Proof of income such as your most recent bank statements; and
- Proof of residence – you can use a utility bill.
Home loans for the self-employed
Are you self-employed and in need of a home loan? The following requirements are essential to ensure approval.
- A declaration of all your finances and assets;
- Your most recent IT34 from SARS;
- A letter confirming your average monthly income preferably from your auditor; and
- Have a deposit amount ready.
Vehicle finance loans for the self-employed
Self-employed loan applicants in need of vehicle finance must;
- Have a deposit amount ready;
- Be a holder of a valid South African driver’s license.
In general, lenders use this information to determine whether or not you can comfortably pay back the loan. In accordance with the National Credit Act, all regulated credit providers must practice responsible lending. Therefore, the amount you can borrow depends on your income.
The application process for self-employed loans is similar to that for regular loans for employed people. Although the application process may take longer since the lender needs more time to verify your ability to repay the loan on a monthly basis.
Most lenders offer an easy and fast online application process. The process generally involves uploading the required documents and completing the online application. Following your application, all you need to do is wait for the lender to respond. You’ll receive a loan offer if you qualify.
Where can you get a loan for the self-employed
Below are some lenders who offer loans for self-employed people:
Self-employed individuals who receive their salary directly from their business can borrow up to R250 000. Nonetheless, informally self-employed people like freelancers and sole traders might not be eligible to apply.
For self-employed individuals, Standard Bank offers vehicle and home loans. The owner of the business will need to provide financial statements, as well as a statement of assets and liabilities.
Prospective applicants can borrow short-term funds of up to R4000 as a new customer and up to R8000 if you’re an existing customer.
Nedbank self-employed loans range from R2000 to R300 000 if you have a monthly income of more than R3 500.
When you have a regular monthly income of R2000 or R1500 on your bank statements, you can qualify for a personal or smaller personal loan.
If you qualify, you can borrow up to R300 000.
How to improve your chances of getting a loan
- Maintain a good credit score
Whether you are eligible for a loan depends largely on your credit score. Having a good credit score increases your chances of approval, and it also lowers your interest rate. Learn more about improving your credit score.
- Organize your paperwork
It is your responsibility to ensure that you have all the financial records required by your preferred credit provider. For example, if you are getting a home loan, comparative financials for the last two to three years may be required.
- Get help from an expert
When making a loan application, you can save time and work by hiring an accountant or auditor to help you with your financial records and tax returns. Additionally, you can work with an experienced bond originator to complete the application on your behalf, which increases your chances of approval.
- Save up some deposit
Make sure you have enough money saved for a deposit if you need a vehicle finance loan or a home loan.
Self-employed loans can be used to cover a wide range of financial needs, including business costs and personal expenses. In addition, self-employed loans are good for emergency situations since some of them provide fast payouts.
As a self-employed individual, you can typically find a loan product that works for you if you have trouble getting funding in the past.