How self employed can get a loan. A Step-by-Step Guide
Usually, we manage to go within the monthly budget to buy goods. But sometimes, big purchases are needed. What if you want to obtain a car or a house? Or maybe cover the unexpected expenses? A cash loan is a solution.
Table of Contents: Cash loan for self employed
To get a credit, you should pass a well-known procedure – prove your reliability. In most cases, it is an easy procedure, but if you are self-employed, things might get trickier.
Nevertheless, it doesn’t mean that you won’t be able to receive needed financial support. Rean on and you will find out how to apply for self employment loan and what are the requirements and interest rates.
Let’s Get Rid Of Fears
Self-employed people have one common fear. They may wonder: what if I won’t be able to apply for credit because I don’t have official papers of employment. However, these documents are not always necessary. Actually, it is possible to provide document that shows your income instead.
Besides, there is a list of other docs you should provide to the banking institution:
- Your ID;
- Show your payments for the past 3 months;
- Show income tax return;
- Audited financial statements in the last 2 to 3 years and SEC or DTI registration.
Plus, you should meet the necessary requirements, which are:
- Be over 21 years old;
- Citizenship of the Philippines;
- Minimum gross income required by the bank;
- Provide a good credit history.
Finally, there are fees you should include when thinking of taking a loan. They add interest fees from the bank, but not only.
Here is what you might encounter:
- Processing fee, which covers all the expenses during the process of giving you a loan. The price is fixed and varies from P1,300 to P2,500.
- Pre-termination fee that bank charges if you can pay off your bills quicker than it was thought. Usually, the numbers vary from 5% or 8%.
- Late payment fee is applicable if you miss your monthly payments. They can vary from 3% to 8%.
- Documentary stamp fee for over P250,000 loans, required by the Bureau of Internal Revenue (BIR). It can be estimated as P1 for every P200.
- Fee for each returned check.
Cash loan for self employed – Main Reasons
Let’s start by figuring out some reasons why people may want to take a cash loan for self employed. Are you sure that you want to borrow cash from the bank institution for your purchase? And can you vouch that you will be able to pay your bills? Once the answer is “yes”, you can move forward.
Think carefully about the reasons that make you want to get a self-employment loan. There can be many intentions for that. Thus, Filipinos are likely to apply for credit for the following purposes.
Education loan
Paying for education can be challenging. However, getting one is beneficial. Even though you have to loan money for it now, it will be quickly repaid after you get your first job. Knowing it, Filipinos tend to lend cash to make payments. That is a strong investment and a valuable reason for banks to approve credit.
Medical needs
Unexpected troubles can reach us at any time. Sometimes you might need extra cash to pay medical bills. And that is the right time when you should consider applying for a loan. Don’t risk your health while there is a solution.
Starting a business
It is great to have a business idea. And it’s even better to make it come to reality. The only downside of it is the fact that there is a long path between stage one (idea creation) and the final stage (starting a business). Moreover, it is impossible to do it without money. And this is when loans for self employed might come in handy.
Starting a family
Love knows no borders. So if you have found a soulmate, you might want to celebrate it and make your relationship official. However, weddings are expensive. In the Philippines, you might need to spend over P500,000 for a celebration. And some extra sum can tear down the boundaries towards your dream.
Can Your Shoulders Carry The Responsibility?
Taking a loan related to a huge responsibility. If you are incapable of paying it off, you can ruin your credit history and lower the credit score. It doesn’t sound that horrible until the future comes, carrying new needs.
Credit history and score represents your accountability. It is a measure, by which banks decide whether you are reliable enough to get a loan. So you must take them seriously and apply for it only when you are sure that you can pay the bills.
Double-check your balance
Never apply for a loan without needed calculations. This id the rule. Moreover, it is better to re-check everything twice or more to be sure that your desires are within the frames of your possibilities.
Stick to the budget that you calculated. You can use apps for that or write numbers down in a notebook. Review it regularly to make sure that you are within the frames.
Read the terms
Banks can offer you various terms, based on which you will be given money. Read them carefully and make sure that you understand every word. Besides, don’t miss a chance to negotiate about terms as well.
Plan and monitor your finances
You might want to consider ways to improve your income. For example, if you change a job or find extra earnings. Therefore, it’s vital to regularly monitor the amount of cash you get and spend to be able to pay the bills.
Don’t overestimate your abilities
When banks lend you money, it seems that all the hard part is behind. Sometimes people can underestimate their abilities and want to borrow extra cash to fund other projects. Don’t take multiple debts, because it is a slippery slope.
So What Now?
Getting a personal loan can be a long procedure. But once you are done with it, you will feel relieved and happy. So what are the steps involved?
- Check out all the possibilities. Visit different banks and lending companies to find out about their terms and requirements and choose the best deal for you in a particular case.
- Check the requirements and apply. In the Philippines, you can do it online.
- Wait for approval. Once you made a request, the bank will review your documents, eligibility, and creditworthiness. The institution will inform when it makes the decision.
- Get cash. You will be able to get money either on your deposit account or by check.
- Pay and close your debt. Stick to the monthly payments and close your debt eventually.
Calculate Your Expectations
All lenders offer their own terms. You can always negotiate them and try to carve out the best deal. To do it, be confident, explain in details the reasons you are asking for money, and ask for special offers. You can discuss the interest rate, fee, and length of your loan.
It’s hard to estimate the amount of money you will need to pay off. However, several major banks provide customers with online calculators. You can use them to count the cost and see if you are capable of paying the bills off.
That’s what we did. We visited a couple of banks’ calculators online to give you an insight on how it works.
Simple example
So let’s say you ask for a P30,000 for a year with. With EastWest a monthly interest rate of 1.49% you will have to repay P35,364.
Here are some other institutions that offer different conditions. With BPI you will repay P2,860 a month for a year and, thus, you will pay P34,320 in the end. Use online calculators, provided by chosen lenders.
BDO has beneficial loans for various purposes. Thus, take P30,000 for a year if you will be able to return P34,500. Depending on the reason of your application, the rates, fees and prices will differ.
Conclusion
There are numerous reasons why a person might need a loan. Sometimes, it is actually the only way to resolve problems. That is why it would have been unfair to leave self employed people without the possibility to use it.
To calculate how much do you need and be able to repay is a must. If you are eligible candidate, have excellent credit history and can show your incomes and tax pays, there should be no problems. Just be rational, responsible, and check out all the information beforehand.
