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Self Cert Loans - Special Lending For The Self Employed |
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Submitted by Rosemary Lane
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Even as recently as a decade ago being self employed was a distinct disadvantage when you went to get a loan in the United Kingdom. UK Lenders just did not like it that they could not ask for that pay stub as proof of employment when you wanted to get a mortgage or other secured loan. Thanks to self cert loans that problem has been resolved for the self employed.
As often happens with change, the market dictated it. More and more people are leaving their jobs behind and becoming entrepreneurs and firms are hiring contractors rather than taking on more full time staff in record numbers. Lenders had to introduce options such as self certification loans or risk losing a vast market.
These self cert loans basically let you state your income without having to provide any pay stub. Some high street lenders but primarily loan specialists offer self cert loans. Of course, with anything that decreases the preparatory verification and increases the risk for the lender there are disadvantages to the borrower, generally in fees or interest paid.
The self cert loans are no different. The catch is that with these loans the borrower almost always pays a lager deposit and yes, interest rates that a little higher than the standard loan or mortgage. The additional fees will run a little more as well.
Different self certification loan companies in the UK will have different lending criteria for the self cert process. Some will concern themselves most with the borrowers affordability, others will place a lot of emphasis on the entrepreneurs job title and credit history while other mortgage or other financial companies will want to look at bank statements or other financial paperwork.
No matter where you get your self cert loan - a specialist lending agency or a high street lender - you will be paying at least a five percent deposit and probably more like ten percent. It generally is true that the bigger deposit you pay up front the lower the interest rate will be for the life of the loan.
This makes simple sense. The more money you spend the less money the lender most risk. A small up front deposit also has the disadvantage of incurring more loan fees.
Even if you have not acquired three years of self employed accounts you may be able to get a loan that is not self certified as well. As lenders apply more and more sophisticated tools for scoring credit without that all-important pay stub they are better able to weigh their own risks with the self-employed as borrowers.
Entrepreneurs and netpreneurs can now realize an additional advantage as well. With a 25 percent deposit on a loan most self-employed borrowers can be assured of choosing from several mainstream loans in addition to their current self cert loan options.
One very important note of caution is that UK legislation frowns on falsifying income on self cert loan applications. Over inflation of income is illegal. They key is to be truthful and borrow only what you must have.
A flexible loan will give you the ammunition you need to overpay, underpay and take an occasional payment holiday as your revenue spikes and drops with your industrys seasonal changes.
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