Gig work is taking the world by storm. As a matter of fact, gig work is becoming a popular alternative to permanent employment; many people are turning to gig work and giving up employee benefits in exchange for more freedom and the ability to decide when, where, and how many hours they want to work. In fact, it is estimated that over the next five years around 52% of the US adult workforce will have worked or will be working independently. Consequently, self-employed or short-term contract work is now the preference for much of the US population.
Within the healthcare system, per diem nurses, or nurses who work with healthcare facilities on an as-needed basis, are also participating in the gig economy by choosing to cover shifts for various medical facilities.
Can a Gig Worker or Per Diem Nurse Qualify for a Loan?
Independence and greater control over your work schedule are some of the major perks of working within the gig economy. That being said, a gig worker may find that qualifying for car or home loans can be harder than for employees. So, at the end of the day, is it possible for gig workers to secure loans? The short answer is yes, but it does take a bit more preparation and bookkeeping.
Read on to learn how exactly a gig worker can secure and qualify for key home and car loans while maintaining the work-life balance that gig work offers.
Start Documenting Your Work History
Securing a home or car loan while working on a per diem basis can be challenging, but it's certainly not impossible. Considering that a report by Gallup showed that 36% of US workers are in gig work, it would be a travesty if the gig economy didn’t allow its workers to qualify for important financial loans and investments.
If you are currently working as a per diem nurse or contract worker, the best way to begin to prepare for vital life investments is to start documenting everything. For instance, lenders will expect to see proof of the following documents to approve you for a mortgage or loan:
- Stable, uninterrupted employment: Having narrow lapses in employment is inevitable when working as a gig worker; nevertheless, most lenders want to see consistent employment for at least two years in the same professional area.
- Proof of income: This can include tax documents, bank statements, profit and loss statements, etc. The idea is to show the lender that you are capable of paying back your loan.
- A good credit history: It almost goes without saying that a good credit score will help substantially to secure a high-quality, low-interest loan. Therefore, maintaining a strong credit history should be a priority for gig workers who are preparing to shop for a new home or car.
Aside from the financial requisites mentioned above, below are some other common documents a lender may ask you to present to prove that you have the liquid assets and employment history to be considered for a loan:
- Certified copy of your business license (if applicable).
- Tax documents, such as W2s (if applicable), 1099s, 1040s (Schedule C and Schedule SE), and 1065s (Schedule K-1).
- Income documents, including at least 7 months' worth of bank statements for a car loan and at least two years’ worth for a home loan.
Additionally, lenders may ask for the following financial history documentation:
- Profit and loss statements, such as Form 1040 Schedule C or Form 1120-S Schedule K-1.
- Credit score (the higher your credit score, the more qualified you will be for a high-quality loan).
- Calculation of your debt to income ratio (DTI).
Saving and Keeping Personal Expenses Separate
Securing a loan as a per diem nurse or gig worker requires showing the previously mentioned documents to a lender. These documents demonstrate that you have the financial means to pay back the debt associated with a house or a car loan. Evidently, keeping track of your personal expenses is also a required part of this process.
For that reason, carrying out the following tasks to ensure that you are prepared to make mortgage or car loan payments every month is also recommendable:
- Sign up with a credit bureau to keep tabs on your credit score.
- Keep excel sheets of your personal expenses, in addition to separate excel sheets for your business expenses.
- Calculate your debts to income ratio (DTI). DTI is a percentage that shows lenders how much money you earn compared to how much money you currently use to pay off your debts.
- Open a savings account (if you don’t have one already). A gig worker who doesn’t have access to a 401K or 403B can open an IRA account. Additionally, you can separate your finances by opening up a small business checking account and paying yourself a salary.
The Bottom Line: Yes, You Can Secure a Loan as a Gig Worker!
Buying a car or securing a home loan as a gig worker doesn’t have to be complicated. At the same time, there are a few more hoops a gig worker may be required to jump through to qualify for a loan.
If you are a gig worker looking to qualify for a mortgage or a car loan, the best solution is to start your bookkeeping now. This will save you plenty of headaches in the future when a lender asks you to present your financial history. The good news is that as the gig economy continues to become a popular choice for the US workforce, more and more lenders may approve loans for independent contractors.
Are you currently working as a per diem nurse and in the process of purchasing your own house or car with gig-work income? What has your experience been? Feel free to leave us a comment below!
