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Loans_for_Self-Employed

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					Title:
Loans for Self-Employed


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442


Summary:
One of the most fundamental details that all banks will look for in all loan applicants is a steady, dependable
income. The amount of this income will decide how much the applicant will be granted.



Keywords:
loan, self, employed, lenders, risk, earnings, borrowers, rates, interest



Article Body:
One of the most fundamental details that all banks will look for in all loan applicants is a steady, dependable
income. The amount of this income will decide how much the applicant will be granted. If there were no
dependable income, then on the face of it, it would appear to a lender’s calculation, that the loan amount
should be zero. This is the traditional method of calculating personal loans.


<b>Self Employed Business Loans</b>


Business loans are calculated on a different basis. They do not need to show guaranteed income. In fact to
do so would be impossible for most business. So banks came up with an alternative way of calculating
business credit worthiness. This involved assessing past earnings, assets, debt and liabilities. A similar
model is now in place for self-employed loan applicants. Instead of showing them evidence of your salary,
you can instead show the bank what business you’re in, how much you’ve been earning and for how long,
how the business is likely to continue and current debts and liabilities. All of this information will then go
into assessing your income, your risk, and how much you can afford to borrow.


<b>Difficulties Being Self Employed</b>


There are still some difficulties involved in borrowing for the unemployed. For example, if you haven’t been
in business for very long, it will again become difficult for lenders to assess your level of risk. Usually they
can get a pretty accurate picture of what your earnings are going to be by looking at the amounts of previous
years. If the income has been steadily increasing or decreasing, they may wish to take this trend into account
but basically, they will be assuming that you continue on as you have been trading thus far. This becomes
impossible if your business is very new. There will be no trading record or past earnings to rely on.


Another difficulty that you will face is that many lenders may still treat the self-employed as a greater risk
than traditionally employed. It is a simple fact that new business fail more often than more established
businesses. They also fail more often then lay-offs occur. So the risk may still be treated as greater and this
will be indicated in the terms and interest rates you receive.


<b>The Future</b>


All this seems to be changing as employed people switch from job to job more frequently than before. This
makes them less reliable, and the self employed are gaining a reputation as good borrowers, the rates you
receive should begin to get closer and closer to those of salaried applicants.




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posted:1/7/2012
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