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Anyone who is self-employed and looking for a loan may find their choice of options reduced following reviews by several lenders in September.
Loan plans for self-employed applicants have always carried different acceptance criteria to loans available for people in full-time employment, largely due to different ways of assessing the applicant's income. A full-time employed loan applicant will normally be asked to show evidence of their regular income by providing a number of recent pay slips. For self-employed people the equivalent of these pay slips are often not available, so company accounts or a signed certification of income needs to be provided by the applicant.
The reliability of this self-certification brings a slightly higher level of risk for the loan provider, so interest rates and amounts of money available vary accordingly. The recent restrictions in global credit markets and the moves by many companies to limit their exposure to loans with higher levels of risk has meant that self-employed loans and loans for applicants with very poor credit records have been under review and, in a few cases, temporarily suspended by some companies.
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