Types of Loans A Gig Worker Should Know

0
350
Loans

Some loan products can help you grow your business. However, it is essential to ensure that you use the right one.

Credit Card Cash Advance

Getting a loan in the gig economy can be difficult due to various factors. For instance, gig workers’ income may need to be more balanced and reliable. Moreover, the application process can be more complicated than those receiving regular paychecks. That is why it is good to check companies that offer several types of loans for gig workers.  Cash advances are a standard option for businesses that need to pay unexpected bills. They can also be used for business expansion or startup costs. However, credit card cash advances can be expensive and should not be your first choice when you need money. Instead, it would be best if you considered other options that offer better rates and fees. A cash advance generally has two primary costs: transaction fees and interest charges. This means that you need to understand the cost before you use it and how much time is required to repay the advance.

Personal Loan

Whether you’re looking to purchase equipment or inventory, resolve a cash flow issue, or cover expenses, having access to extra funds can be helpful. Personal loans offer this liquidity, but you should carefully consider the type of loan you want before applying. The key to a successful personal loan application is a good credit score based on factors such as annual income and payment history. You’ll likely qualify for lower interest rates and fees if you have a stable and consistent income source and make timely payments.

Gig workers may be more difficult to qualify for traditional personal loans because they need a regular income, but some lenders specialize in working with them. These lenders can provide loans to self-employed people with various credit scores.

Business Loan

Whether you need to expand your business, hire more employees or purchase inventory, a business loan is an option that can help you achieve your business goals. However, before applying for a loan, ensure your business idea is sustainable. When looking for a loan, lenders consider three main factors: your credit score, your business history and the size of your business. It’s also important to consider your payment schedule and the loan term.

For example, consider a short-term or a term loan with an extended repayment period since these loans typically come with lower interest rates than long-term or cash-flow-based business loans.

Getting a loan can be stressful, so finding one that makes the most sense for your business and its goals is important. Using a lending network can make the process easier, as you can search for several direct lenders offering loan options to gig workers and sole proprietors.

Line of Credit

If your business needs to cover a gap in cash flow, a line of credit (LOC) may be the best solution. These loans allow companies to pay off unexpected expenses or upcoming purchases for which they know they need funds.

The lender also reports your repayment activity to the credit bureaus, which can raise your business’s overall credit rating. However, it’s important to use your LOC carefully and pay back the amount you borrow in full every time you access it. Gig workers also need to take self-employment tax into account when budgeting. Building this into your monthly spending will help you avoid surprises when filing taxes is time.

If you are self-employed, build up your business’s revenue and profit before applying for a loan.