When you’re self-employed, you usually have a less structured lifestyle than if you were working a standard 9-to-5 job. This has both its pros and cons. Rather than showing up to an office at a set time, you probably have a little more freedom to set your own schedule and make your own decisions about how, when and where you work.
That’s the good news. The bad: Sometimes, your finances are a little less structured too. This means not only is it tougher to make a steady income, but even if you do, it’s tougher to demonstrate that on paper. This means that if you want to take out a loan for, say, purchasing a home, it might be challenging to prove you’re qualified.
If you see this being a challenge in your future, you’ll need to plan ahead.
Getting a handle on your cash flow
If you want to have any hope of getting self-employed home loans, you’ll need to be able to demonstrate that you have a steady income. According to the Australian Securities and Investments Commission, the best way to do this is to behave like a regular employer, looking to stabilise cash flow and avoid scary-looking periods of volatility.
The goal is to give yourself a “paycheck” each month just like any employer would. Keep in mind, however, that it’s difficult to pay yourself lavishly if the industry you’re in is volatile and unpredictable. Stay conservative with the amount you pay yourself; otherwise, you risk running into solvency trouble later.
Putting everything in writing
Getting self-employed personal loans, like any kind of loans, requires showing solid documentation of your earning power. This is tougher to do when self-employed, which is why Domain recommends putting in extra effort to organise any and all written proof of the income you’re bringing in.
Applying for a loan is all about looking good on paper, and every little improvement helps. Whether it’s paying off a bit of credit card debt or keeping your overhead expenses low, look for ways to make yourself look more stable financially.
Getting just the home loans you need
If you’re interested in getting a loan but unsure what options are available to you when self-employed, it might be a good idea to look into the possibility of a low-documentation home loan. With low-doc home loans, you can get a loan without having to submit massive amounts of paperwork.
At Redrock, we specialise in helping people secure cost-effective loans who might not be able to otherwise. This includes the self-employed. Reach out to us today for help finding your financial footing.