As a self-employed person, you’ll likely already know that there can be a bit of extra paperwork required when seeking lending.
If you’re in the market for car finance and want to be prepared so that you can focus on what you want lenders to give you, rather than the paperwork you need to supply them, this read is for you:
Four tips for self-employed people when preparing for a car loan.
- Is your car loan for personal use or business use? If your vehicle is for business use, it pays to start researching your options early, as interest rates, security, and the paperwork required can vary depending on your occupation and industry. For example, those in occupations that are likely to have a high level of vehicle use, resulting in rapid depreciation such as taxi drivers or Uber drivers, may need to provide more information to the lender, or pay a higher deposit.
- Match your payments to your cash flow. If you only get paid on the 20th of the month (or thereabouts depending on your clients - you know the drill) then it might not be ideal to set up weekly or fortnightly loan repayments. Even if you do sometimes receive income outside of the 20th of the month cycle, it could be more appropriate to commit your repayment cycle to your definite and reliable income cycle. You can always make additional payments if cash flow allows, but missing payments on your car loan can impact on your credit rating.
- Talk to your accountant and decide whether you are eligible for tax benefits from the loan. This can help you determine the best way to structure your repayments and may influence the level of deposit you decide to put into the purchase. Also, your lender will need to know this - they will need to work out your repayments and affordability, based on the amount you are borrowing to finance your vehicle.
- Decide how to structure your payments and how long to take out your loan for. Is it better for you to put in a higher deposit and have lower payments – or is it better for your cash flow to put in the minimum or no deposit and have higher payments? And another key factor in the mix - and important to carefully consider - is how long you want the debt for. Take five to think about the difference 6, 12 or more months could make to the total cost of borrowing.
As you’ll likely know, being self-employed generally means you have to do more to prove not only your income, but how reliable it is. But when it comes to any kind of finance, it’s important to be prepared so that you can ensure your needs, not just getting an approval, come first. When applying for a car loan, take the time to make sure you know what you want your loan to do for you. Put yourself in the best position to ask your lender for the structure that suits you best.
To have your car finance sorted before you need it, call AA Finance on 0800 500 555, seven-days a week between 9am and 5pm. We’re here to help.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure the content is correct, the information provided is subject to continuous change. Please use your discretion and seek independent guidance before making any decisions based on the information provided in this article.