Self-employed car finance
Being your own boss can be liberating and rewarding, with the freedom to choose your own hours and work at your own pace. But sometimes financial decisions can be less straightforward when you are not permanently employed.
Frustrating as this sounds, this is because without the safety net of regular, predictable monthly earnings, lenders will be more wary about offering you finance, and will need to be sure that you can repay any credit before offering you a loan.
If you’re self-employed, getting a car finance may seem daunting, but rest assured, the application process is pretty much the same as for anyone else. You can apply for car finance; you might just need to provide some additional documents. Find out more about self-employed car finance below.
Can I get car finance if I’m self-employed?
While it’s certainly possible to get car finance if you’re self-employed, the process is a bit more time-consuming compared with being on the payroll for someone else.
You will need to provide a range of documents to any potential lender to demonstrate that you are financially stable and, therefore, a suitable candidate for credit.
That said, because the demand for credit has grown, and so many people are self-employed in the UK today – around 4.31 million to be precise – the industry is now much better equipped at serving
this sector. Some lenders, including Oodle, gladly offer self-employed car finance as long as you satisfy their criteria.
If you work for yourself, you can apply for car finance in exactly the same way as anyone else; there may just be a few extra steps to take before you are approved. What it boils down to is being able to
satisfy any potential lender that you can be relied upon to repay any car loan, despite having irregular earnings.
What documents will I need to get car finance as a self-employed?
Every lender will have their own criteria, but broadly you can expect to provide some, or all, of the following:
3-6 months’ worth of bank statements
Recent tax returns
Details of your trading accounts if you are a registered company.
What are the best ways to finance a car for the self- employed?
The same car finance options are open to those who are self-employed as to everyone else. There are several different types of car finance, the most popular being hire purchase (HP), personal contract loan (PCP), or personal loan. As with any big financial commitment, you’ll need to do your research to decide which is the best choice for you and be certain that you can afford to make the repayments before going ahead.
How can I increase my chances of getting approved for car finance if I’m self-employed?
There are several things you can do to make yourself more attractive to lenders.
Register on the electoral roll – Firstly, make sure you are on the electoral roll. This confirms your address and identity and is a fundamental component of a good credit record.
Manage your financial stability – Secondly, make sure your finances are in order. Ensure outstanding debts are paid off, cancel any non-essential subscriptions and try to keep your regular spending in check. If it’s practical to do so, terminate any financial agreements (joint bank accounts for example) that you have with any third parties who have a poor credit rating, as being associated with someone with bad credit could
negatively affect your own credit score. Keep up-to-date, thorough records of your earnings and expenses, bank statements and tax returns, because these are likely to be requested during any finance application. Having organised, accessible records will help to keep any finance application as pain-free as possible.
Improve your credit score – Thirdly, your credit score plays an important role in a lender’s decision regarding your car finance
application. If you’re self-employed, having a good credit score increases your chances of getting
accepted for car finance. Therefore, it’s a wise idea to work on improving your credit score before applying. You can do this
by consistently making on-time payments, staying within your credit limits, paying off old debts, registering to vote, checking for errors, reporting any mistakes, and more. Learn more about credit score.
Place a substantial initial deposit – Finally, if you can afford it, saving for a larger deposit can help to increase your chances of securing finance. The more cash you can supply up front, the less risk lenders will feel they are taking, making them more likely to provide you with the funds you need. Plus, the larger the deposit, the smaller the loan you’ll need to pay off, with less interest and lower monthly repayments overall. Apply for car finance with Oodle in just a few minutes without affecting your credit score, and drive away safely. Find out now.