When it comes to loan approvals, banks and government agencies in the Philippines adopt a strict attitude, especially towards freelancers. Freelancers find it challenging to provide proof of a stable income in the form of payslips, certificate of employment, or income tax return, which reduces their chances of getting their loan applications approved. Thus, irrespective of how well you are earning as a freelancer, it is quite likely that lenders will see you as a credit risk and refuse you a loan. Though, as a freelancer, your self-employment status in the Philippines may make it difficult for you to be eligible for a loan, there are a few things you can do to better the chances of your loan application being accepted.
1. Register Yourself
The biggest mistake that most freelancers commit is not registering themselves as professionals or businesses. Since the process of filing ITR is complicated, freelancers often ignoring filing their taxes. This simple mistake can lead to significant complications while applying for a loan as well as credit cards and visas. If you are working as a freelancer in the Philippines, the first thing you must do is to register yourself with the Bureau of Internal Revenue (BIR). Once you have registered yourself, make sure you are filing your ITR on time each year. As a registered taxpayer, you can use your income tax return slips as proof of your income while applying for a loan. The ITR is considered to be one of the most credible documents by lenders, and thus, a valid ITR will make your loan application a lot more likely to be approved.
2. Maintain a Good Credit Score
If, as a freelancer, you wish to increase your chances of getting a loan approved, you must do everything to maintain a good credit score. The credit score denotes a person’s ability to repay the loan. Thus, most lenders use the credit score as a useful metric to measure and understand the credibility of a borrower. There are many things people can do to maintain a good score or enhance it if needed. For starters, always pay your premiums and credit card bills on time. Further, always use your credit card judiciously.
3. Secure Business Permits
If, other than freelancing, you are doing any business on the side, make sure to register your business with the Department of Trade and Industry (DTI) and secure business permits from the designated authorities. Registering your business will allow you to prove to your chosen lender that you are not only a freelancer but also have other sources of income and thus, are in a stable position to repay the loan.
4. Make Sure You Have All the Required Financial Documents
Lenders ask for various financial documents before making any decision on a loan application. These documents are primarily used to assess borrowers’ ability to pay their loans back on time. Since freelancers do not have payslips to support their loan application, they should use other accepted documents to support their request. Some of the documents that lenders accept are:
- Certificate of Employment: Even if you are not a registered employee of a company, most businesses that hire freelancers agree to provide the freelancer with a certificate of employment, which clearly states important details, such as gross income and the duration for which the freelancer rendered their service to the company.
- Certificate of Earnings from Upwork: If you are working with an online platform like Upwork, you can use the Certificate of Earnings report as proof of income. In most cases, this certificate shows the income earned by a freelancer in the last one to twelve months and is a document accepted by most lenders.
- Certifications of Investments: Other than certificates of employment and earning, freelancers can also use certifications of investments to support their application. If you have invested in stocks, mutual funds, or unit investment trust funds, ask your bank or broker to provide you with a certificate and add this certificate to your application.
- Proof of Assets: If you own a home, car, or any other tangible asset, you can add its evidence to your application.
- Bank Statements: Last, bank statements are always credible proof. So, attach your last six months’ bank statements with your loan application.
5. Borrow from an Informal but Legitimate Lending Company
In case you are in urgent need of cash but are having a hard time getting your loan application approved from a bank, you can choose to apply for a salary loans, online cash loan, quick cash loan, instant loan, or payday loan with an informal lender. However, before signing any papers, make sure you are dealing with a legitimate company. Make sure the company you are borrowing from is registered with the Securities and Exchange Commission of the Philippines. In most cases, these informal lenders will ask you to provide them with a valid ID and a proof of age certificate and will decide on your loan application within 24 hours of you making an application with them.
6. Borrow from Your Bank
In the case, you have had an account in a bank for long or have a good banking relationship with this bank, you must apply for a personal loan with the same bank. Your bank knows how much you earn and has an idea of your ability to pay back the loan because the income from your freelancing gigs goes into this bank account. Thus, when you apply with a bank with which you have had banking relations for long, it becomes easy to get your loan approved.
The Final Word
If you are a freelancer in the Philippines, it undoubtedly will be challenging to get a loan approved. However, it won’t be impossible. However, if you have started freelancing only recently, here’s a tip: wait for at least a few years to apply for a loan. In the meantime, you can collect all the documents mentioned above to enhance the chances of your loan application getting approved.