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1099 Loan: How To Get Personal Loans for Independent Contractors & Gig Workers

Updated on October 17, 2022


Businesses may not always find it economically viable to recruit new employees to fill the gaps. In that case, they might choose independent contractors from outside their organization to execute specialized jobs or short-term projects. These workers have the freedom to work for multiple employers at once and form a part of the gig economy. In some organizations, independent contractors and employees frequently coexist while performing the same or related tasks. And though there are significant legal distinctions between an employee and an independent contractor, it might be hard to distinguish between them based on their work.

This raises the question, what distinguishes an employee from an independent contractor, and does the difference affect an independent contractor's ability to get approved for a personal loan?

Whether you're an independent contractor or any other gig worker, being strapped for cash might be unavoidable. Continue reading to find out everything you need to know about independent contractors, how they differ from traditional workers and how they can get quick and easy access to money during any financial emergency.

What is an Independent Contractor?

A self-employed person hired to perform services for another company or organization is known as an independent contractor. Also known as 1099 workers, independent contractors are not employed by any person or a company but work independently or on a project-to-project basis.

Being an independent contractor has several benefits. The two most commonly mentioned benefits of working as a 1099 worker include having freedom in choosing their hours of work and the nature of work they'd like to pursue.

There are some drawbacks of being an independent contractor, particularly concerning finances. Usually, these workers don't receive the same benefits as the regular employees in the organization who might be doing the same level of work. Hence, independent contractors are in charge of funding their own retirement plans and health insurance. However, this may not be the case with all self-employed individuals.

Are Self-employed Individuals the Same Thing as Contractors?

It's a clearly established fact that not all self-employed individuals are independent contractors, but all independent contractors are self-employed. This means you could be a self-employed person without being an independent contractor.

There is a thin line between being a self-employed person and an independent contractor, yet it is crucial to understand if you're planning to start on your own. Independent contractors typically work on projects or tasks predetermined by a contract and employed by a third party. Self-employment, on the other hand, goes beyond this.

Apart from independent contractors, the self-employed worker category also includes contract workers, freelancers, and gig workers. This clearly shows that independent contractors are merely a subset of self-employed individuals. While self-employment is the act of making money without engaging in an employee-employer relationship, as opposed to independent contractors who provide their labor or services to a company or person on a contractual basis.

Here are two scenarios to make the difference between a self-employed worker and an independent contractor cleaner:

Scenario #1

Consider yourself a painter who performs contractual work for businesses. You create artwork and get paid on a 1099 tax basis. You're an independent contractor and also self-employed.

Scenario #2

Let's imagine you're a painter selling your paintings on Etsy. Your Etsy store is where you directly sell the art pieces you create and make money. Although you work for yourself, you are not an independent contractor.

Now that you have a clear picture of the difference between an independent contractor and a self-employed individual, you might be interested in knowing how an independent contractor can establish a credit score to get an instant loan without a steady income.

Understanding Credit Scores as an Independent Contractor

Like any other customer, credit score for independent contractors is based on information found in their credit reports. Based on different scoring models used by the three major credit bureaus- Equifax, Experian, and Transunion, you will be able to assess whether you have a good or a bad credit score.

Your credit score will likely impact your chances of qualifying for a loan. Most financial institutions you have or are still dealing with report your credit behavior to the credit bureaus, who then use it to prepare your credit report and calculate your credit score. Lenders and other financial organizations will subsequently use these reports to decide if you are eligible for their loan product or other financial services. Usually, lenders are more inclined to grant you a loan if you have good or acceptable credit.

Paying your bills on time could be challenging as a gig worker, especially if you don't have a consistent income. Certain factors could lead to a bad credit score, and your payment history is one of the most influential factors in determining your credit score. Fortunately, various loan options are available for gig workers with excellent or bad credit.

What are the Loan Options for a Self-employed Individual?

When you require extra cash, you don't necessarily need a regular 9 to 5 job to qualify for a loan. Below are some loan options that gig workers can consider when they need money quickly and do not want to borrow from friends or family.

1099 Income Loans

Self-employed or independent contractors that have trouble being approved for a traditional mortgage loan can apply for a 1099 income loan. If you earn 1099 income as an independent contractor, you can utilize your 1099 earning statements to prove your eligibility for a loan. Instead of looking at tax returns, lenders examine income from 1099. These loans have far more lenient income restrictions than conventional mortgage loan options.

Personal Loans

You can take out a personal loan for independent contractors for all kinds of business expenses or personal expenses. These loans can be secured or unsecured, and borrowers can repay them with scheduled installments. Your credit scores and income determine your loan terms and the maximum available loan amounts. The good news is that some lenders offer personal loans for people with bad credit, making this loan option quite accessible for most people.

Title Loans for Independent Contractors and Self-Employed Workers

A type of secured loan that uses the borrower's car title as security is a title loan. Your ability to repay the loan and the car's worth can help determine how much you can borrow. You can apply for these loans with bad credit and get the funds you need fast. Independent contractors with no income proof can therefore use a title loan in an emergency.

Small Business Loan or SBA loan

SBA loans may be accessible to workers and businesses of all income levels. These loans have three main requirements: that you operate as a sole proprietorship (as most contractors do), that you operate for profit, and that you do business in the United States. The amount you can borrow from an SBA loan will vary depending on the type of loan, your income, your credit score, and your capacity to repay the loan.

There are other secured loans, lines of credit, and even unsecured loan options for independent contractors or 1099 workers besides those mentioned above. You must ensure that whichever loan option you choose, you should never borrow more than you need, irrespective of how much you qualify for.

How Does the 1099 Income Loan Program Work?

Simply put, a 1099 loan is a loan designed for self-employed or independent contractors who can use their 1099 form rather than pay stubs, tax returns, W2s, or other standard documents to borrow money they need. Since 1099 is a crucial document to prove self-employed individuals' income, it's essential to double-check that these forms have been filled correctly and completed. The 1099 form must be filled out by the individual who hired the contractor. The majority will utilize form 1099-NEC, which stands for Non-Employment Compensation, however, there are other sorts of 1099 forms too. This document essentially attests to a person's status as an independent, non-paid contractor rather than an employer.

Securing a loan can be complicated for an independent contract or 1099 worker. But with a 1099 form and the right online lender, you can get a 1099 personal loan to help you pay for various uncertain expenses.

How Can Self-employed Business Owners or 1099 Employees Apply for the Loan?

The process of applying for personal, payday, title, SBA, or business loans differs from lender to lender. If you're an independent contractor or a gig worker, you can most often expect the same application process as any other user. Here are the standard three steps you may have to follow in case of most 1099 personal loans:

1. Submit an Application
Filling out and submitting an application online or from a store location will be your first step. The lender might contact you if additional information is needed to process your application.

2. Receive an Offer
Once the lender receives and verifies your documents, you will be asked to sign the loan agreement if you qualify for the loan. You will get the cash after you sign.

3. Start Making Payments
You can use the funds you borrow for any purpose and start making payments. Some lenders also allow you to set up a payment schedule and consider setting up automated payments.

What Documents Do 1099 Employees Need to Apply for a Loan?

Although applying for a loan is pretty much the same for every borrower, the documents required for an independent contractor can vary slightly.

Lenders frequently ask for proof of income during the loan application process. A pay stub from a company is the most typical proof of income provided by borrowers. However, pay stubs are not usually provided to independent contractors and self-employed workers in the gig economy. Hence, they'll have to provide valid proof of their self-employment income.

Here's a list of documents that 1099 employees can use as proof of income for loans:

1099 employees need these items to apply for a loan

Are Bank Statements Proof Of Income?

Presenting documents as proof of income may be simple for those who are employed, but it may be comparatively tricky for those who are self-employed. Self-employed people cannot provide a typical pay stub and often don't earn the same amount each month. While some months could be better for them, others are not so good.

Hence, a bank statement is one of the many documents you can use as proof of income when you're self-employed. If you have regular deposits and withdrawals, you can present your bank statement to the lender to prove you have a consistent income.

A bank statement with a lot of activity will demonstrate to the other party that you consistently receive income from your freelancing employment. It is even better to present 6-12 months of statement.

It's a good idea to open a bank account exclusively for your business if you don't feel comfortable using your personal bank account to conduct business with other companies.

How Much Can Gig Workers Borrow for a Loan?

Personal Loans for independent contractors can provide fast and easy money solutions with loan amounts ranging from hundreds to thousands of dollars based on your state and the loan type you select.


If you're an independent contractor and work slows down for a while, you shouldn't worry too much. You have various credit options offered by a bank, credit union, or private lender to choose from in case of any financial uncertainty. If you have a consistent income and a history of making payments on time, lenders won't have any problem in giving you a loan. You might find 1099 personal loans quick and simple to apply. By securing a personal loan for independent contractors, you may continue taking care of your family's essential necessities while fulfilling your financial commitments.

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Harita Solanki

Harita Solanki is a passionate advocate for personal finance and believes in empowering individuals to take control of their financial lives.

Her expertise covers a wide range of personal finance topics, including budgeting, saving, credit, debt management, and retirement planning.

With over six years of dedicated experience in the finance industry, Harita has helped countless readers of CASH 1 Loans make informed decisions and achieve their financial goals.

As a dedicated writer, Harita has contributed to numerous financial publications, sharing her knowledge and insights to help readers navigate the complexities of personal finance.

Her writing style is approachable, concise, and tailored to the needs of everyday individuals looking to improve their financial well-being.