Are you a gig worker ready to take your passion project to the next level? Chasing your dreams can require a responsible approach. Whether you're a freelance writer, a talented artist, or a skilled handyman, turning your gig into a thriving business often demands a financial boost.
15M Finance has prepared a guide that will help you to fund big dreams. We will break down the different types of loans available and spill the beans on how to find the best deal for your specific needs.
What Is A Gig Worker?
A gig worker hustles and takes on short-term jobs or gigs, usually freelance. They're like modern-day freelancers, doing various tasks and projects for different clients or companies. It's all about flexibility, working on your terms, and embracing the gig economy. So, they're the independent workers who make a living by being their boss and taking on gigs as they come.
What Are Loans for Gig Workers Available on the Market?
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You can access many loans for gig workers and pay for any expenses. Remember that each loan has its features that help solve your financial problem. So let’s start with the list of available loan products for gig workers:
Payday Loan for Gig Workers
A payday loan can be handy for a gig worker because it offers quick cash in a tight spot. It helps cover immediate expenses like bills or unexpected emergencies. For example, as a gig worker, you may get a quick 500 dollar loan that will allow you to cover operating expenses. But remember, it's important to use payday loans responsibly and pay them back on time to avoid getting caught in a cycle of debt because their APR may reach 375%.
Merchant Cash Advances
A merchant cash advance is one of the most accessible financing options for self-employed individuals. It's like getting a cash advance on your future earnings. So, if you're a gig worker and need quick cash for equipment and marketing, a merchant cash advance can come to the rescue. You can access funds and avoid the hassle of traditional loans.
This business cash advance has short-term schedules (from 4 to 18 months), and interest rates are charged in factor rates (from 1.1 to 1.5). This factor rate is a method that identifies how much a loan will cost you. It’s applied for high-risk loans borrowed by business owners with bad credit scores. Given the complexity of these financial arrangements, many people turn to debt relief services in Florida, or anywhere else they are located, to navigate potential pitfalls and renegotiate terms when necessary.
Auto Loans
Auto loans allow you to borrow money to buy a car and increase your business income. With a car loan, you can spread the cost over time and make manageable monthly payments. Plus, having your wheels means more gig opportunities and flexibility to take on jobs wherever, whenever. The interest charges and terms vary by lender and dealer, but they are cheaper than payday loans.
Microloans
A microloan boosts when you need extra cash to invest in your business expenses. Whether you need to buy new equipment, upgrade your skills, or try marketing strategies, these small loans from reputable sba lenders can come to the rescue. They're flexible, easy to access, and don't burden you with high-interest rates.
Traditional Personal Loans
A traditional personal loan is a financial product you borrow from your bank or credit union. Dealing with conventional financial institutions may be stressful if you have a poor credit report. If not, it’s an excellent chance for a small business owner to get a flexible payment schedule. If you have enough business income and can prove your good credit history, traditional personal loans are for you.
Instant Line of Credit for Gig Workers
You can use lines of credit as revolving installment loans you borrow and repay in a circle. So instead of relying on a fixed loan amount, an instant line of credit for gig workers allows you to access funds whenever needed. Whether you need to cover unexpected expenses or smooth out cash flow between gigs, lines of credit got our back. Contact your financial institution for more information.
Credit Card Cash Advances
A credit card cash advance is suitable for independent contractors with expenses. Suppose you've just completed a gig but need some cash immediately for gas or supplies. Instead of waiting for the next paycheck, you can use your credit card for an instant cash advance. Consider it a small loan from your credit card company. Even if a credit card cash advance is convenient, remember that cash advances usually come with high-interest rates and fees. So use them wisely and pay them back as soon as you can.
Pros and Cons of Gig Worker Loans
Saving your bank account from crushing and ensuring your success in the gig economy is not simple, but you can do it thanks to an advance payment. However, don’t borrow a business cash advance or an installment loan until you understand their pros and cons. Here are the main points to consider:
Pros
Flexibility: As a gig worker, your income may fluctuate, and traditional lenders often hesitate to work with folks like you. But gig worker loans are specifically designed to cater to your needs, considering your irregular income streams.
Easy access: Applying for gig worker loans is usually hassle-free. You can often find online platforms or lenders that specialize in offering loans to gig workers. The application process is straightforward; you can access many financing options within several clicks.
Tailored for gig workers: Gig worker loans are designed with gig workers in mind. The repayment terms are often more flexible compared to traditional loans. Depending on your income schedule, you might have options like daily, weekly, or monthly repayments.
Cons
Higher interest rates: The convenience and flexibility of gig worker loans often come at a cost. Unlike traditional loans, a cash advance in a gig economy is more expensive. The lenders view gig workers as higher-risk borrowers due to the irregular income nature of gig work.
Limited loan amounts: Cash advance loans for gig workers might have lower borrowing limits than traditional loans. Lenders may restrict the loan amounts to mitigate their risk. While this can be a drawback if you need a large sum of money, it may help you to avoid borrowing more than you can afford.
Potential dependency: While gig worker loans can provide short-term financial relief, relying too heavily on these loans can lead to a dependency cycle. If you constantly need loans to cover your basic expenses, it might indicate that your gig work isn't providing stable enough income.
What Kind of Credit Score Do Gig Workers Need for a Loan?
When getting a cash advance loan in your bank account and covering gig expenses, it’s crucial to assess your credit score first. Usually, lenders have different credit score requirements you must meet. But it is your responsibility to improve it and avoid high-interest charges. Most lenders will request at least a fair credit score (580 to 669) to provide you with a small business loan. However, many lenders work with bad credit gig workers who need a cash advance.
Unlike a traditional bank, a direct lender may perform a soft credit check that won’t affect your credit score. According to the loan agreement, they might verify your pay stubs instead of requesting your credit report from major credit bureaus.
Who Qualifies for a Gig Worker Payday Loan?
Payday loans for gig workers are a short-term financing option explicitly designed for people working in the gig economy. Such loans provide quick access to funds for those who may not qualify for traditional loans due to their non-traditional work arrangements. Various types of gig workers are typically eligible for such loans, including:
- Sellers and owners of franchises
- Driving or Taxi services
- Freelance platform workers
- Small business owners
- Independent contractors
- App delivery services
Eligibility Criteria Self-Employed Workers Must Meet
To qualify for a loan, there are specific criteria that gig workers typically need to meet. However, it's important to note that particular requirements may vary among lenders. But the basic criteria are the following:
- A steady income and valid bank statements;
- An active bank account;
Bottom Line
Gig workers may also face financial difficulties. Whether you're a freelance artist, a dog-walking enthusiast, or a master of all trades, there's a loan option just waiting to fuel your ambitions. Remember, doing your homework and researching all the loan options available is crucial. Don't let those sneaky interest charges and hidden fees make you forget about your dreams.