The gig economy has taken off in recent years, with 4.9 million Americans today doing gig work.
But while gig work does have some advantages over traditional employment, one challenge is that it can be more complicated for independent workers to secure financing when they need extra cash.
Knowing which loan options are available to gig workers can help make life easier. Whether looking for a small loan or significant funding, here’s a look at some personal loans that are available for independent workers today.
Loan Options for Gig Workers
While people in traditional employment may have a slightly easier time applying for a loan, there are several options for gig workers as well, including the following:
Personal Loans
Personal loans are a popular option for people looking for quick funding. These loans allow you to borrow a lump sum of money and repay in regular monthly installments, typically with fixed interest rates.
Title Loans
Title loans are another option, but this requires that your vehicle be used as collateral to secure the loan. Failing to repay these short-term loans on time could result in your car being forfeited, making this loan a risky option unless you’re sure you’ll be able to pay it back by the due date.
Credit Card Cash Advances
A credit card cash advance is another option that allows you to borrow a portion of your card’s credit limit through an ATM or teller cash withdrawal. Still, cash advances aren’t without their downsides. Finance charges start accruing immediately from the transaction date, with no grace period, making them costly.
Additionally, cash advances carry higher interest rates than regular credit card purchases, and you may be charged transaction and ATM fees on top of that. These factors, combined with the potential negative impact on your credit score, make cash advances a less favorable choice.
How to Show Proof of Income as a Gig Worker
Lenders will ask for an applicant’s proof of income. For a gig worker, that may include the following information or documents:
- Tax returns – Some lenders may want to see one or more years’ worth of tax returns as proof of income.
- Bank statements – Some lenders will ask for bank statements instead of pay stubs as proof of income.
- Proof of income letters – A letter of proof of income from your accountant may also work.
- 1099 forms – This is a common document you receive from those who pay you and serves as another way to prove your income.
In addition to proof of income, lenders usually ask for the following to verify your identity:
- Driver’s license or state-issued ID
- Passport
- Military ID
- Social Security card
- Birth certificate
- Certificate of citizenship
The Bottom Line
There are several types of loans that gig workers can apply for. When assessing which loan is best for you, be sure to consider the interest rate and the repayment terms. Make sure you can secure the funds to pay the loan back.
By taking time to research your options and then reading the loan terms in the loan agreement carefully before you sign on the dotted line, you’ll be able to help ensure that you’ll get funding on your terms, even as an independent worker.
Notice: Information provided in this article is for information purposes only and does not necessarily reflect the views of finsmes.com or its employees. Please be sure to consult your financial advisor about your financial circumstances and options. This site may receive compensation from advertisers for links to third-party websites.