What are the best loans for the self-employed? | moneyfacts.co.uk

Michelle Monck

Michelle Monck

Consumer Finance Expert
Published: 30/12/2020

Those who are self-employed and want a loan to either consolidate their personal debts, buy a new vehicle or for home improvements can choose between applying for an unsecured loan or a secured loan. These types of loans can only be used for personal borrowing, those needing to borrow to invest in their business will need to use a form of business finance – this includes a business loan, invoice finance or asset finance.

Unsecured loans for the self-employed

An unsecured loan relies on the credit score of the applicant and evidence that their income is regular. The self-employed may be required to provide additional evidence of income when applying for an unsecured loan such as sharing with the lender their full business accounts, SA302, Tax Year Overviews and/or Accountant’s Certificates.

Unsecured loan rates can vary depending on your reasons for borrowing, the amount to be borrowed and the applicant’s personal circumstances. Currently the best unsecured loan rates for a £5,000 loan over 36 months are from:

  • Tesco Bank at 3.40% representative APR – requires a regular income but not specific o evidencing for the self-employed
  • Hitachi Loans at 3.50% representative APR – requires permanent paid employment but not specific on evidencing this for the self-employed
  • MBNA at 3.50% representative APR – asks for applicants to have a regular income, but not stated on evidence for the self-employed


Some lenders do offer loans with specific reference to the self-employed, for example the new challenger bank, JN Bank UK states that self-employed income must be at least £1,000 per month after tax and the business must be more than 12 months old.

Use our loans calculator or check your eligibility for a loan now

Use our loans calculator and compare unsecured loan rates with our charts. If you are ready to apply for a loan, use our free loans eligibility service and see in minutes a selection of lenders most likely to offer you a loan, without leaving a mark on your credit file.

Secured loans for the self employed

Those that are self-employed and want to borrow more than £10,000 can also consider a secured loan. A secured loan uses the borrower’s property as security for the loan and this means that this is at risk if the loan is not repaid. This assurance means the lender can reduce their reliance on a credit score (although they will still check the credit score) and focus on your income and ability to make your monthly repayments.


There are at least nine lenders currently open to lending to the self-employed. The maximum loan-to-values (LTVs) generally range from 60% up to 85% including any mortgage already held on the property. Interest rates for secured loans start at around 3.80% but can reach as high as 15% depending on the circumstances of the loan. Each lender will also have a maximum loan they are happy to provide, and this can be from £15,000 up to £500,000.

Compare secured loans

Compare secured loans using or charts or contact our preferred loans broker to find out which lenders could help you.

Self-employed businesses struggling due to Coronavirus

Those that are self-employed and are struggling due to the impact of Covid-19 should make sure they have claimed for the latest Self-employed Income Support Scheme (SEISS). This scheme has now been extended for a third round and claims for this must be completed on or before 29 January 2021. The government has also announced a fourth round for the period February 2021 to April 2021.
The SEISS grant is worth 80% of the average monthly trading profits over three months and is capped at £7,500. This is paid in a single instalment. Self-employed businesses need to have had their profits significantly impacted due to Coronavirus between 1 November 2020 and 29 January 2021 to be eligible to claim.


The SEISS grant does not need to be repaid but is subject to income tax and national insurance and businesses claiming this grant will need to report this on their 2020/21 self assessment tax return.
Find out more about SEISS on the government website.


In addition, there are also government backed loan schemes available for businesses impacted by Coronavirus including Bounce Back Loans and Coronavirus Business Interruption Loans. See the government website for the full range of support available.

Disclaimer

Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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