Can a contract employee get a personal loan?

Personal Finance · 09 Jun 2020

From construction to IT, Australia's biggest industries are relying ever more on short-term contract workers to complete specific tasks they don't have the skills for in-house.

From construction to IT, Australia's biggest industries are relying ever more on short-term contract workers to complete specific tasks they don't have the skills for in-house.

If you're a contract employee or self-employed, and you don't have a steady income or regular employer, you might have a harder time accessing financial services compared to full-time employees, but you don't have to miss out.

However many hours you work, in whatever industry, you may still be eligible for a personal loan in Australia. However, you'll probably be required to provide more documentation, your approval may take slightly longer, and you'll want to compare loan providers to find the best deal.

What documents do I need to provide?

To apply for an unsecured loan, you'll have to provide similar documents to someone in full-time employment, with a couple of extras. These usually include:

  • Proof of identity
  • Proof of income
  • Notice of Assessment

Different lenders have different requirements, with high street banks often needing to see more documentation than online lenders. Making sure you have all your documents ready to upload or show in person when you apply will save time.

Proof of identity

Everyone who applies for a personal loan in Australia needs to prove who they are to prevent identity theft. This can be done by showing a valid government-issued photo ID.

If you're applying online with Harmoney, we'll ask to see either an Australian driver's licence or current passport. This can be scanned and uploaded through our online platform.

We'll also ask for a recent photo, which you can upload or take with your webcam. This will be analysed using facial recognition technology to prove that you are the holder of the ID.

Proof of income

Contract employees and self-employed applicants have a greater burden when proving their income. This is because some lenders consider people who don't have a steady income to be at higher risk of missing repayments or defaulting on a loan.

When you apply through Harmoney, we just need to see your last three months of bank statements to prove to us that you're capable of keeping up with your repayment schedule. Depending on your financial situation, we may also ask to see:

  • Your most recent tax return
  • Profit and loss statements from the last financial year

Notice of Assessment

If you're responsible for paying your own tax, you may also need to provide a Notice of Assessment from the ATO when applying for a personal loan. This is an itemised account of the tax you owe on your taxable income for the current financial year.

You can request a copy from ATO here. Once you receive it, you should check for any errors and have these corrected before using it to support your loan application.

How long will it take to get a loan?

Once you've uploaded or handed over your documents, your lender will decide whether they can offer you a loan and give you a personalised rate based on your circumstances. This process can take a little longer for contract workers and self-employed borrowers, as there are more documents that need to be checked by your loan provider.

With a traditional bank, this can take anywhere from a few days to a few weeks, which won't be ideal if you need money urgently. Online loans through Harmoney are approved and funded much faster – sometimes as soon as the next day – and you'll usually receive your money in the next few days.

How to improve your chances of getting approved

If you're worried that your loan application won't be successful, here are a few things you can do to make lenders look at you more favourably:

Improve your credit score –comprehensive credit reporting in Australia now shows lenders the good as well as the bad when it comes to your financial history. Keep up with your loan, credit card and bill payments and don't apply for multiple lines of credit at the same time for a healthier credit score.

Get a statement from an employer – if you're on good terms with your current or recent employer, ask if they can write a glowing letter that confirms you worked for them and are likely to do so again in the future.

Work for longer – this isn't always possible, but you could get a better loan deal if you apply after working for 6 months or longer.

Show savings – if you have a few thousand or more saved up, a statement from your savings account will show lenders that you'll be able to make your loan repayments even if you're temporarily out of work.

Apply online – online lenders and peer-to-peer marketplaces are generally more accepting of alternative forms of income than traditional banks, so you're more likely to be approved and to be offered good loan terms when you apply for a personal loan online.

Try our personal loan calculator to see how much you could borrow.

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