Loans for Gig Workers: Get the Cash You Need Between Jobs

Since the pandemic, the number of gig workers and other self-employed individuals has exploded. In fact, some reports estimate that approximately 36% of the US workforce earns all or most of their income through gig work or freelancing. But it can be a little harder to get a loan if you don’t fall into a traditional employment role.

Types of loans for gig workers

There aren’t necessarily loans designed specifically for gig workers, but that’s really no surprise. After all, gig workers — or self-employed, freelancers or contract workers — are just workers who get paid a little differently and perhaps not as consistently as more traditional employees. But you still have nearly as many loan options as your average W-2 employee.

Personal loans for gig workers

Getting a personal loan when you’re a gig worker might be a little more challenging, but it’s not impossible. You may just need to dig a little deeper to find lenders that accept alternative forms of income.

A personal loan could make sense if you need a larger sum and want to repay it over time. But you’ll need good credit for the most competitive rates and loan terms.

Installment loans for gig workers

Installment loans — also known as short-term loans — are usually characterized by loan terms of 36 months or less or even just a few weeks or months. The best short-term loans have low APRs, a wide range of loan amounts and terms, and no fees, although it can be difficult to find one that checks all those boxes.

Some lenders, such Avant, welcome self-employed or gig workers and also accept people with credit scores as low as 580. But you’ll have to submit two years of tax returns, and it may charge administration fees.

Cash advance apps for gig workers

If you only need a small amount of cash to make it your next payday, try downloading a cash advance app for gig workers. These apps don’t require credit checks, typically don’t charge interest or late fees and are relatively easy to qualify for. But you’ll still have to meet provider requirements, and advances could be too small, especially for first-time users.

Some cash advance apps also require you to receive income by direct deposit, which isn’t always an option for gig workers. If you’re in that boat, consider cash advance apps that don’t require direct deposit.

Payday loans for gig workers

In an emergency, payday loans offer access to fast cash without much hassle. Gig workers shouldn’t have a problem qualifying as long as they have an active bank account and proof of income.

However, interest rates are super high, and payday loans present a very real risk of falling into a cycle of debt. This option should really only be considered as a last resort.

Payday alternative loans for gig workers

Some federal credit unions offer a far better alternative to payday loans with the aptly named payday alternative loans (PALs). These loans are usually capped at $1,000, offer competitive rates and often have more lenient requirements than other loan types. But gig workers — and others — normally have to be a credit union member for at least 30 days to qualify.

Merchant cash advances (MCAs) for gig workers

A number of lenders offer merchant cash advances (MCAs), and specific types of self-employed or gig workers may be able to qualify. MCAs are basically an advance on your future earnings that you’ll repay in daily or weekly installments.

But you really need to run a business — like retail — that has a large volume of credit card sales and can handle a rigorous payment structure. It’s also a very expensive form of financing, so you might want to explore other loan options first.

Compare personal loans for gig workers

As mentioned, there aren’t specific types of loans for gig workers only. Instead, the best types of loans for gig workers are loans that have more flexible eligibility requirements. You can compare lenders by loan amount and more to see what loan options work best for your situation.

How to get a loan as a gig worker

It’s important to be prepared and research your options before applying for a loan as a gig worker.

1. Calculate how much you need. Figure out exactly how much you need so you don’t borrow more than you can realistically afford.
2. Evaluate your budget. Calculate how much you can afford to spend on a monthly payment. This amount helps you determine the loan term that fits within your budget.
3. Check your credit. Knowing your credit score can help steer you toward the right lender. For instance, if you have a low score, you can search for lenders that work with borrowers who have poor credit.
4. Compare lenders. Look for lenders that accept income from gig workers and offer loans in your ideal range. Be sure to compare interest rates, loan terms and fees. It’s also not a bad idea to check with your regular bank since you already have an existing relationship.
5. Prequalify. If possible, prequalify with a few lenders to get an idea of your rate and find the best deal.
6. Gather your documents. Find out what information the lender requires, such as tax returns or 1099s, so you can have everything on hand.
7. Apply. Once you’ve found a lender, complete the application and submit any required documentation. The lender could approve your loans within minutes and disperse funds as soon as the next day.

How can gig workers prove income?

Lenders may require gig workers to submit a bit more documentation than they need for W-2 employees. Exact requirements vary by lender, but in general, have the following documentation available:

• 1099s
• Paystubs, if applicable
• Tax returns
• Bank statements
• Investment income, if applicable
• Profit and loss statements, if applicable

Pros and cons of getting a loan as a gig worker

Consider the advantages and disadvantages of taking out a loan as a gig worker.

Pros

• Potential for fast funding. Many loans for gig workers could put money in your bank account within a day or two.
• Better rates than credit cards. Most rates on loans for gig workers are more competitive than credit card rates.
• Build credit. A history of on-time payments can help gig workers build credit — or raise their scores — making it easier to get financing in the future.
• Income source is not always a factor. Some lenders, such as cash advance providers, don’t care where you make money or your credit score. They just want to verify consistent banking activity.
• Multiple options. There are many loan types to choose from — many of which support income from gig workers.

Cons

• Risk of inconsistent income. One of the downsides to gig work is that income can fluctuate, potentially making it more difficult to budget for monthly loan payments.
• Limited pool of lenders. Some lenders only offer loans to W-2 employees because they see gig workers as too risky.
• Higher rates. Even lenders that approve loans for gig workers may tack on higher rates or fees because of the perceived risk of self-employed income.
• May need strong credit and income. Some lenders may require higher credit scores and income levels to grant loan approval to gig workers.
• Could potentially damage your credit. Even one late payment can cause your score to drop, making it harder to get approved for future financing.

Tips for gig workers to get approved for a loan

There are a few things you can do to improve your chances of loan approval when you’re a gig worker:

• Raise your credit score. The higher your credit score is, the better odds you have to obtain loan approval. Paying down existing debts or disputing any inaccuracies on your credit report are two of the fastest ways to boost your score.
• Don’t take on any new debt. This is not the right time to buy a new car or apply for a new credit card because it can hurt your score, making you appear riskier to a lender.
• Keep a consistent job, if possible. Despite the stereotype, plenty of gig workers have long-term, consistent employment. For example, if you’ve been working for Uber or Instacart for the last two years, now isn’t the best time to change your job if you want to get approved for a loan.
• Get a cosigner. If you don’t think you can qualify on your own — or the rates and terms aren’t competitive — ask a friend or family member to cosign with you on a personal loan. A cosigner can dramatically increase your chance of loan approval, especially if they have good credit and strong finances.
• Offer collateral. Secured loans usually have lower rates than unsecured loans and better chances of loan approval.

Alternatives to loans for gig workers

If you think you might not qualify for a loan as a gig worker, consider these alternatives:

• Home equity financing. Gig workers who own their own home may qualify for a home equity loan or home equity line of credit (HELOC). But keep in mind that these loans use your home as collateral, and the loan process can be lengthy.
• Borrow from friends or family. Maybe you know someone with deep pockets who could afford to lend you some money. Just be sure to offer interest and draw up an agreement with defined terms and a repayment schedule.
• Credit cards. Credit cards are typically much easier to qualify for than loans, and you might be offered a credit limit that meets your loan needs. But interest rates are higher on credit cards unless you can get a card with a 0% introductory rate.

Bottom line

Loans for gig workers can be more challenging than for more traditional employees, but it’s not impossible. You may just need to dig a little deeper to find lenders that accept income from self-employed or gig work and possibly supply additional documentation.

Consider personal loans, cash advance apps, installment loans, PALs or alternative forms of funding. Always compare lender rates, terms and fees to find the best deal.

Frequently asked questions

What is proof of income for gig workers?

It may be harder to prove income for gig workers, but unless it’s cash, there’s usually a paper trail. One of the more common ways to prove income when you’re a gig worker is by submitting 1099s. However, tax returns and bank statements are also suitable official forms for proof of income.

How do you get paid for gig work?

Payment methods for gig workers come in a variety of forms. The most common ways are by direct deposit, checks or even cash. Other clients may send money via PayPal or with prepaid debit cards or through apps such as Venmo or Zelle.

Can I get a loan for gig workers if I can’t prove my income?

If you don’t have a way to verify your income — say you get paid in cash, for example — it can be much more difficult to get a loan. However, if you’ve claimed cash payments on your taxes, you may be able to submit your taxes for loan approval.

Also, many cash advance app providers need to see regular deposits to your account but don’t really care where the money comes from.

What is the best banking app for gig workers?

There are plenty of banking apps for gig workers or the self-employed, but check the features to make sure it has the functionality you need.

For example, the Found banking app is one possible option. It accepts multiple deposit methods — even cash — and supports multiple payment apps to accommodate different client payment methods. It also sends and accepts invoices, captures and saves receipts and tracks mileage and expenses.