In Canada, 1.7 million Canadians worked in the gig economy in 2016. Since then, that number has proliferated due to the number of online platforms entering the industry such as Uber, Airbnb, TaskRabbit, and more. The addition of these companies has changed the way Canadians earn an income.
While gig work has become a principal source of income for many Canadians, it has also brought certain disadvantages, particularly with access to credit. Due to the instability of gig work, getting approved for a loan as a gig worker can be difficult.
Thankfully, despite the unique financial problems gig workers face, there are a number of different loans they can rely on for financial support.
Below, we’ve briefly discussed a few loan options that gig workers can use depending on the financial difficulty they are facing.
A personal loan is a classic loan for emergencies due to the fast approvals. There are many alternative lenders who provide funds to applicants the same day they apply, which makes it an incredibly convenient source of financial support during emergencies. Moreover, they are relatively inexpensive compared to other short term loans like payday loans and credit cards. Personal loans also allow you to spread costs by paying the amount over a generous period of time, usually 3 months to 10 years depending on the loan amount.
Being a gig worker often means you have to purchase and maintain your own equipment to keep your business running. Sometimes, you’ll have the funds necessary to buy the equipment yourself, other times you may require some help or will want to use credit to keep your cash flow steady.
For times like these, consider an equipment loan. An equipment loan is a loan that is secured by the equipment you buy. Rather than buying the equipment in one lump sum payment, you are able to pay for your asset in periodic installments over a period of time, with interest.
A line of credit provides quick access to cash when business is slow or when there is an emergency. A line of credit gives you access to a certain amount of money, which you can use according to your needs. Interest is only paid on the amount you use. Moreover, like a credit card, you regain access to the amount borrowed as you pay it back.
If you’re ever strapped for cash due to slow-paying customers, you can use invoice factoring which lets you sell your invoices to a third party for a certain rate. Meaning, you can expedite your payments and tap into any unpaid invoices that you have now, rather than waiting and struggling to get your customer to pay.
While traditional banks typically shy away from giving loans to gig workers, alternative lenders are a good substitute for banks, as they can provide gig workers with the financial resources they need to keep their businesses and personal life afloat. Unlike banks, alternative lenders use a number of different factors, in addition to credit scores, to assess the eligibility of a borrower.
Getting approved for a loan as a gig worker typically requires that you have a reliable income and a steady job. While your income may be strong as a gig worker, you don’t have the stability of a salaried employee, which could be a deterrent when applying for a loan with a traditional lender.
As such, you may have better luck applying with an alternative online lender instead. Do some preliminary research into the lenders that offer loans to gig workers based on your income and credit score. Online loan aggregators let you quickly pull up a list of lenders along with their interest rates, fees, terms, and eligibility requirements.
To apply for a loan as a gig worker, you’ll need to provide the lender with the following:
If you apply with an online lender, you can usually get approved within 24 to 48 hours and receive your funds electronically shortly after.
Freelancers, temporary workers, contract workers, and other independent workers are the typical terms used to describe gig workers. What these workers all have in common is that they are paid based on completed tasks rather than the number of hours worked. This work style provides an incredible amount of flexibility for the worker. In fact, there are a number of benefits that come with being a gig worker.
As freeing as it may seem to work in the gig economy, it also comes with some restraints. Unlike traditional workers who have a steady income, steady hours, and benefits they can fall back, many Canadians who work in the gig economy are faced with financial insecurity due to the low pay, irregular hours, volatile payments, and lack of benefits.
Being a gig worker can be rewarding and more engaging than a regular 9 to 5 job, but it’s important to be aware of the difficulties people face in this industry. Due to the irregularity of their jobs, many banks are unwilling to lend to gig workers. Fortunately, alternative lenders have different lending standards and are able to support gig workers and their businesses during financially difficult times.
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Lisa has been working as a personal finance writer for more than a decade, creating unique content that helps to educate Canadian consumers in the realms of real estate, mortgages, investing and financial health. For years, she held her real estate license in Toronto, Ontario before giving it up to pursue writing within this realm and related niches. Lisa is very serious about smart money management and helping others do the same.
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