Applying for small loans when you are self-employed

Some loan providers treat self-employed people as if they have the plague. As if they and are walking around ringing a little bell they wear around their necks and shouting “unclean, unclean.” But not all loan companies are the same. Some are more enlightened.

Any loan business worth its salt will want to ascertain from potential applicants, proof that they can repay a loan within the terms agreed. However, some loan companies don’t really care- particularly the unregistered or illegal ones. 

Avoiding any bogus lenders

In South Africa, for example, you should stay well clear of any lender that is not NCR (National Credit Regulator) registered. There are plenty of bogus lenders around, including the now-infamous Mashonisas. All these lenders are concerned with is offering loans at extortionate interest rates and recovering their money as soon as possible. 

They have little or no interest in how big a risk you pose in terms of borrowing money. It’s because they think nothing of employing strongarm tactics to collect money owed and will frequently charge extra for delinquent payments.

Genuine NCR registered loan companies

There are plenty of legitimate, NCR registered loan companies in South Africa. If you would like to view a list, please visit the registered credit providers web page on the NCR website. You can search by the lender’s name, their NCR registration number, or by town. Be careful, though. 

Just because a lender shows a registration number on their website or their advertising doesn’t necessarily mean they are bona-fide. Illegal loan companies are quite capable of using a false number on the premise that people won’t bother to verify its validity. Don’t get caught by this ruse. Check their number out on the NCR website before doing anything else. 

Where to start

If you are self-employed and you are looking for a small loan to give you some finance options, you ought to start by familiarising yourself with the usual prerequisites that most loan companies require self-employed applicants to conform to.

Don’t do what many self-employed people do when looking to borrow a small amount of money and discount legitimate lenders just because of your employment status. Yes, some can be a little more difficult than others when it comes to lending money to those who work for themselves. However, there are plenty of other lenders who will be willing to oblige providing you can satisfy one specific criterion.

The one thing any self-employed person needs for a successful loan application

A successful loan application is all about being able to show any potential lender that you have a regular income stream. Where your income comes from should be of little consequence as long as it is enough to cover the loan repayments. 

That being the case, what you must be able to give any potential lender is a copy of your bank statement. Ideally, it should show no less than 12 months’ worth of transactions, including of course your regular income streams. The longer your statement stretches back recording a regular sustainable income, the better. It reduces any risk from the potential lender’s viewpoint.

Self-employment gaining more credence

The unemployment rate in South Africa is currently 29.1{c08da6746524858c1afed82ddd821083f45da5a576526cd25f0b0f7601fef75b}, according to Stat SA website. It is the highest rate since measurements began using the Quarterly Labour Force Survey methodology back in 2008.

With conventional work being hard to come by, becoming self-employed is gaining more credence, with many people turning to starting up their own online businesses. It’s good to know that self-employment is being taken seriously by the establishment.  

The key is making sure that you build a steady, reliable income stream; not only to support your lifestyle but to open doors for things like small loans when they are needed. 

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