A common situation self-employed professionals encounter is a general difficulty obtaining certain kinds of financing, such as car loans. The need to maintain reliable proof of income and a solid credit rating can be challenging if you run your own business. However, by keeping a few helpful steps in mind, you can be self-employed and get approval on the car loan you need.
Financial Records
The most vitally important tool a self-employed loan applicant needs is a well-kept financial record. Your financial records help you prove income to lenders in place of the paystubs and W-2s employees can provide.
Always keep at least two years of your income tax returns in a safe place. Both a virtual copy that is backed up onto a reliable storage device and a hard copy in your office at home should be kept, just in case you need to prove your income or tax history at some stage. You will most likely need these income tax records when submitting a car loan application if you are self-employed. Ask the lender how they consider the numerous tax deductions self-employed professionals usually claim. If your lender does not consider at least some of those deductions as income, your overall reported income level may not be sufficient to get a loan approved.
Bank statements can also be used as additional proof of income, especially if the lender you are working with does not count any of your self-employment tax credits toward your official annual income figures. A helpful bank statement will show a pattern of incoming payments.
References and Cosigners
A list of personal references and one or two potential loan cosigners can also help you get car financing if you are self-employed.
Collect the full names, reliable phone numbers and addresses of five to 10 people you can rely on as personal references. A lender will ask for references for two reasons. The first is to confirm information you have already provided, like your job and address. Secondly, references give your lender a way to find you if you fall out of contact. Explain to your references that they may be contacted before you give their information.
If you find it impossible to get a car loan on your own because of your employment or income status, you may need to figure out who in your life could cosign the loan.
Self-employment does not need to stand in the way of your ability to finance the purchase of a car. Keep strong financial records and try to maintain a good credit history to make getting a car loan easier as a self-employed professional.
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