While many are unaware, they also have options for saving money on their loan repayments, reducing monthly payments, or paying off that daunting student debt as quickly as possible. Student loan refinancing involves taking out a new loan with new terms, interest rates, repayment periods and monthly payments. It can make a massive difference in your financial future and, despite what you may have heard, it’s available for self-employed people, if you just learn where to look.
Work with lenders that specialize in self-employed programs
When you have a regular job and salary, student loan refinancing is simple because the lenders know that as long as you’re employed, they are guaranteed a certain percentage of your income. Some lenders see self-employed people, who often have vastly varying incomes every month, as higher risk. That means that if you go with a traditional lender, like a large bank, they could charge you higher interest rates. Some may disqualify you altogether.
But as the self-employed market continues to grow, new lenders are popping up, prioritizing applicants’ overall current and past financial status rather than their monthly bank balance. That can be great news for self-employed people who can prove a history of financial responsibility.
How to increase your chances
For self-employed borrowers, it’s a top priority to make sure you can prove your financial standing. That means paying all your bills on time, reducing your debt, and having different forms of credit – all of which will be reflected in your credit report.
Many lenders offer online applications that take just a matter of minutes. But instead of pay stubs to prove your earnings, you’ll need to prepare some alternative forms of documentation, like tax returns, invoices or bank statements. Check with the lenders to inquire about what documentation they accept.
Tips for making it work, even if you face some obstacles
If your credit score or income is insufficient for a loan, that shouldn’t deter you. There are several alternate routes to take. One is to have a co-signer, or a relative or friend with good standing credit who would be willing to co-sign a loan with you. You can also wait a few months to work on improving your credit score by making your payments, paying off debt, and diversifying your credit line.
If you find that none of the options are viable for you, you may want to consider taking on an extra side hustle to come up with the money. Some lenders will consider your added income as part of your loan application, thus increasing your chances for approval.
As always, take the time and effort to shop around with various lenders. Learn from them about the ways they work with self-employed borrowers and the ways that, even if you’re not currently eligible, you can help improve your chances for the future. Eventually, when you’re able to refinance and get a better grasp of your financial situation, you’ll be freed up to help focus on making your business successful.