Online loans are popular among regular workers since they are more accessible than traditional loans and don’t require a lengthy application process or exhaustive credit check. Also, most online lenders typically only accept applications from individuals currently in full-time positions.
However, even though many freelancers are interested in applying for online loans, they are unsure how to get started or what kinds of online loan products are accessible to them.
If you’re a freelancer planning to avail online loans, read through to learn what it takes to qualify for one and which loan options are tailored to your needs.
What Is a Freelancer?
To put it simply, a freelancer is someone who works for themselves rather than an employer. Freelancers may work on contract for many clients but are technically independent contractors.
They may focus on a specific or broad range of services. Freelancers are professionals who also operate as sole proprietors. People are attracted to freelancing because it promises time flexibility, as long as they can meet their client’s needs and the agreed-upon deadline.
Online Loans for Freelancers
It can be challenging to get a loan from a bank if you’re a freelancer. Having to meet several requirements and wait for an application to be processed makes this option unfitting for self-employed individuals like freelancers. Although it’s challenging for freelancers to secure traditional loans, they may be qualified for non-bank financing options like online loans.
Online Personal Loans
Personal loans are perfect for freelancers because they have no time-in-business or income requirements. A self-employed individual can take out a personal loan for various purposes. It can be used for everything from home improvements to the down payment of your dream car. Personal loans can also be used for unexpected medical expenses and unplanned vacations.
Types of Online Personal Loans
There are a few different kinds of loans you can apply for if you’re self-employed, but your choices for personal loans are as follows:
Unsecured Personal Loan
To qualify for an unsecured personal loan, you don’t have to put up any collateral. You may qualify for loans with more favorable terms if you have a history of prompt payments and other positive credit habits.
In addition, the interest rate for an unsecured loan could be lower than that of a secured loan. Unsecured personal loans can be obtained from online lenders like CreditNinja.com at fixed interest rates.
However, some loan companies have a minimum loan amount requirement, which could cause you to borrow more money than you actually need.
Secured Personal Loans
In some cases, freelancers might not have a lengthy credit history to show a lender. A secured personal loan is a good choice in such circumstances. To qualify for a secured loan, you must pledge an asset of equal or greater value against the loan, such as your home.
The interest rate on this loan is lower than average because collateral is used to guarantee repayment. If you’re a home-based freelancer needing financing, a secured loan could be your best option.
Online Lines of Credit
A line of credit is a revolving form of loan that allows you to access your funds whenever you like, so long as you have them and your account is in good standing.
The lender sets the maximum amount of credit available to the borrower depending on the borrower’s creditworthiness, and the borrower has access to the line of credit whenever necessary.
Lines of credit are also made available to freelancers. Lines of credit are a common way for self-employed individuals to get cash while they wait to be paid for their products or services.
The money goes toward paying for regular expenses, potential growth plans, stock purchases, or debt consolidation. Assets such as real estate, vehicles, or even office equipment can be used as collateral for a line of credit.
Online Term Loan
Term loans are secured loans where the lender and borrower agree on a predetermined amount of money and repayment terms. Lenders agree to receive a fixed payment from borrowers at a defined interest rate on a specified payback period.
Businesses with limited resources often turn to term loans to fund the purchase of machinery, storage facilities, or office furnishings. As a self-employed individual, it’s possible that you need this loan to purchase essential equipment for your work.
Types of Online Term Loans
Here are the types of term loans you can consider:
Companies that don’t meet the criteria for a line of credit often receive these term loans. These loans often last for a shorter period, though they can cover up to 18 months if warranted.
The term for such loans is typically between one and three years, and regular monthly payments make repayment out of a business’s cash flow.
There is some time flexibility in terms of these loans, ranging from three to 25 years. They take security in the form of corporate assets and expect regular payments from the business’s income or cash flow.
Additionally, they restrict the company’s ability to incur additional debt, pay dividends, or pay executive compensation. Also, they might require a certain percentage of annual profits to be set aside for loan repayment.
Today, freelancers and self-employed individuals can get loans from various sources if they need urgent financial support. As long as you can demonstrate responsible credit behaviors through decent credit history, you can qualify for an online loan when needed.