Installment Loan: Financing for self-employed still difficult

Like other clients, self-employed people often need credit, for example, to handle short-term expenses or pay urgent bills. While workers in these cases can simply apply for installment credit from their bank, the situation for the self-employed is often difficult. Often, applications must be reviewed in the longer term before a credit decision can be taken. An interesting alternative is installment loans, where an employee, such as a spouse, acts as principal borrower. Self-employed persons act as second borrowers in these cases. In spouses or civil partnerships so can the desired loan despite being self-employed.

Installment loans for the self-employed often difficult

People who are self-employed usually do not earn a fixed income but fluctuate income. The amount of income here depends on the season, but also on supply and customer demand. Sometimes days or weeks go by without any significant income, but shortly thereafter the revenue gushes. For the banks such a variable income situation is associated with relatively high risks, because if the revenue can not be achieved as planned, rates of arrears risk. The later dunning procedure and a possible write-off of the loan amount causes comparatively high costs. For this reason, many banks rather reject installment loans for the self-employed and refer to the credit options in the area of commercial financing. Here then everyone must credit individually have insurance or a mortgage are hedged.

The conditions for lending to the self-employed

Like any other professional group, self-employed persons, freelancers and tradespeople also have to fulfill requirements in order to be able to apply for a loan. If these are not fulfilled, the application must be rejected. Of course, the most important requirement is a secure income from self-employment. Only with this can the monthly installments for the desired loan be financed. But also a positive Schufa- information should be present, because I show her petitioner, the previous obligations were fully and punctually served.

The conditions for self-employment for a loan :

  • Self-employment must exist for at least three years
  • Business needs to carry itself
  • Monthly surpluses to finance the loan must be available
  • positive Schufa information

In general, the requirements for lending to the self-employed are no greater than for any other professional group. Experienced bank advisors also oversee the financial situation of applicants quite quickly and can thus make a credit decision within a few days.

The commercial financing for the self-employed

A good way to finance projects, have self-employed through the commercial financing. This is offered by local banks and savings banks and can not usually be done online. In the context of these financings self-employed persons can fall back to the following offers:

  • Working capital loan as overdraft on the business account
  • Investment financing with long maturities
  • Financing through leasing offers

The financing for the self-employed differentiates between different types of credit. With the working capital loan, customers can have their bank grant the possibility of an overdraft. The amount of the loan is based on the account turnover and can amount to several thousand euros. In the case of investment financing, however, self-employed persons require extensive documentation on their financial circumstances. To be submitted are economic evaluations, balance sheets and profit and loss statements. Based on this data, the bank can determine which rate is acceptable and grant a corresponding credit. Characteristic of this form of financing is the granting of collateral . This can be life and pension insurance, but also mortgages on real estate are conceivable. Leasing financing is available as a third financing option for the self-employed. Both cars and machines are then leased at a monthly rate, so to speak, rented. However, such financing can only be provided if business operations are positive.

The self-employed must secure loans

Since the income situation of many self-employed persons is rather difficult, banks usually only grant loans , if appropriate securities can be made available. Land charges as well as the pledging of bank or insurance assets are eligible as collateral.

These securities can be provided by self-employed persons:

  • Assignment of life or pension insurance claims
  • Pledging credits on banks or building societies
  • Land charges on private or commercial properties
  • Assignment of storage or business facilities

The security chosen for each financing depends on the size of the loan and its purpose. If, for example, real estate or machines are financed, they will later be used as collateral. They are assigned or assigned and can be sold if the bank does not pay the loan installments. A likewise gladly used possibility of the credit protection is the assignment or pledge of credits. Many self-employed have a life or pension insurance, the surrender values ​​can be used accordingly. A condition for accepting a security is its value, which is checked and calculated by the bank in advance. If collateral is required, the corresponding documents must also be submitted when applying for the loan.

Private financing for self-employed

In addition to business financing, self-employed may also need private financing, such as when their own car needs urgent repair or the home is to be renovated. With such a private financing, many banks are struggling because of the above circumstances. Only a few banks offer installment loans for the self-employed, but often at relatively high interest rates. Here, the higher risks associated with such lending are calculated and billed to the customer. If an installment loan is approved, self-employed individuals can also take advantage of this form of credit:

  • Loan amounts between 1,500 – 25,000 euros
  • Terms individually selectable
  • fixed monthly installment and fixed rates
  • no separate protection

Advance loan offers for the self-employed can be found above all at direct banks on the Internet. Which conditions apply here and which conditions are to be fulfilled for the lending, must be examined individually.

Apply for installment loans together with your spouse or partner

A good alternative to applying for a loan on your own is through loans taken with your spouse or partner. Many banks accept self-employed as a second borrower and then use their income. However, a prerequisite for lending is that the principal borrower has a fixed monthly income from a non-self-employment, ie is an employee. For employees, the credit risk is significantly lower from the bank’s point of view than for self-employed, as they receive monthly income from their employer. Although this can vary slightly, for example at hourly rates, there are no major deviations as with self-employed people. The second borrower serves the banks as a kind of guarantor . Only when the first borrower can no longer pay, the second borrower enters and takes over the rate. Spouses of a non-self-employed and a self-employed can easily borrow and finance their wishes.

Tip: Use the comparison options on the Internet to obtain suitable and affordable financing. Through comparisons, potential savings of a few hundred euros are possible.