Being self-employed means that you’re going to have to put in a little more effort into finding the right refinancing solution for you. That’s exactly why we’ve put together a refinancing guide to help you get a clearer picture of what you should pay attention to, how to choose a loan and most importantly, how to find the best option for your needs.
Self-employed borrowers encounter difficulties when they’re looking to refinance their loan. This happens because financial institutions will take a closer look at their income and are sceptical due to not knowing how their business is going to progress.
This refinancing guide will tell you how to start when you’re self-employed.
- Talk to a Lender
Finding the right refinancing package relies on how much you earn. According to your income, you’ll know the amount you can borrow and the limit.
Without taking to time to assess the situation, you may end up disappointed, so start slow and talk to a lender that will be able to give you some points on how to proceed and what you should know.
- Do the Math
The second part of this refinancing guide is to calculate exactly how much you’ve made in the last couple of years. Two years is usually the amount of time relevant when discussing about self-employed people.
Go through your records and place all your receipts in order.
- Fill the Paperwork
Get your paperwork in order by gathering financial statements, notice of assessments and income tax returns. Unfortunately, having a successful business doesn’t get you a free pass on all of these.
Although it’s time-consuming, without the necessary papers, it would be harder to convince a lender that your business is doing well and you can afford to refinance.
- Are You, in Fact, Self-Employed?
Many people confuse being self-employed with sub-contracting deals or being a contractor. Some lenders might think that as long as you work for others, you might pass as an employee, which could help you skip some steps involved in this refinancing guide.
- Be Honest about Your Expenses
A new piece of equipment, a few more employees or a training course might have raised your expenses the last year. Don’t try to hide them from your lender and explain the situation. There’s always a solution, even though it may not be obvious to you just yet.
- Adequate Taxable Income
Unfortunately, this is one of the hardest requirements for a self-employed person. Saying and proving that you can afford to refinance a loan are two different things.
An adequate taxable income is sort of like your green pass when looking into refinancing. Try to get the necessary paperwork to also prove it.
This refinancing guide contains the significant steps that you’ll have to make to refinance your loan when you are self-employed. There are benefits and drawbacks when you work for yourself, but seek professional advice if you’re having doubts about how to proceed.