While self-employment allows for flexibility, and there’s really no limit to the income you can earn, there are some potential drawbacks when it comes to getting an affordable vehicle loan.
You can absolutely get car finance when you’re self-employed. In fact, because it’s becoming so common across the globe, more lenders are going to have to develop an understanding of what self-employment looks like and how it can impact someone’s income on a monthly basis.
Until then, the best thing you can do is to prove that you’re a responsible, stable person who makes enough money each month to live comfortably. Showing some of the things you’re currently making payments on while showing your work history with some consistency is the best way to do just that.
Show You Have a Steady Income - Some lenders still question the stability of certain jobs. One of the best things you can do is to prove to a lender that you have a steady income. You can show that to them through things like bank deposits, check slips, or even bank statements if some of your clients directly deposit funds into your account. Bringing several months of bank statements can actually be a good thing that shows lenders you make a consistent amount of money and you’re able to live comfortably.
Bring a Proof of Residence - Car finance and home financing aren’t that different. Bringing a proof of residence to your lender is a great way to show that you’ve consistently been make mortgage repayments, or rent payments each month. Showcasing your financial responsibility is crucial in making sure you get the loan you need.
Have Your Tax Forms Available - The longer the history that can be provided to prove your income, the better. Taxes are a great way to do that since they are official documents that can be trusted and easily looked over. Taxes also establish a work history, which is another good sign for lenders. The longer you’ve worked, the better, even if it’s been under self-employment.
Finally, one of the most effective ways to secure a loan for yourself is to put together a strong down payment before you go to speak to a lender. If you have a certain vehicle in mind, a good rule of thumb is to have anywhere from 5-10% of a down payment ready.
But, if you can save up more than that, it’s even better! Not only will your monthly payments be less (and your interest rate will likely be lower), but you’ll prove to your lender that you already have a sizable chunk of money ready to go, and you’ll be able to secure more for monthly payments.
This might seem obvious, but having a good credit score can be a huge component when it comes to car finance. That’s true whether you’re self-employed or not!
There are plenty of free websites where you can check out your credit score. If it’s lower than you’d like, you can boost it by always making sure your bills are paid on time and keeping your debt to a minimum.