Quite often, self-employed individuals don’t receive a standard wage, unlike permanent employees. That makes a lot of difference when getting a car loan. Lenders typically require borrowers to provide certain documents, such as payslips, to prove that they can afford the loan. Having a payslip shows consistency and stability of earnings and employment. However, if you’re a sole trader, you likely don’t have a payslip, which tells the lender that you do not earn a regular income.
It can be challenging to apply for car finance for the self-employed. However, if you can demonstrate that you can afford the loan repayments, you’ll find a few options for you:
Certain lenders offer low-doc car finance for people without standard documentation, such as self-employed individuals. Therefore, you will not be required to provide a payslip. Instead, you can submit other documents that show your borrowing power and your business income, such as a letter from your accountant or Business Activity Statements (BAS).
Since there is a significant risk for the lenders, they will charge you a higher interest rate than regular loans. You can have a bigger chance of getting approved if you apply for a secured car loan from low-doc lenders. This means you need to provide an asset as collateral. Typically, the collateral is the car you’re purchasing itself. In doing so, the lender’s risk decreases, and you may be given a lower interest rate.
Whichever type of car finance you apply for, you will have a better chance of approval with a good credit score. It reassures the lender that you are a borrower who exhibits positive behaviours and an excellent reputation for paying down your debts.
Lenders will generally ask for the following documents for self-employed individuals to apply for a car loan:
Of course, you’ll have to provide identification documents like your birth certificate, driver’s licence, or passport. You may also need to give utility statements to prove your identity further.
In some cases, you’ll be asked to register for Goods and Services Tax (GST), depending on the value of the car and the financing you will receive. If you’re financing a car for less than $150,000, you may not need to provide your tax return documents. In addition, if you’re planning to get a truck for your business, you may be exempt from the exact requirement if the vehicle is less than $250,000.
You can typically borrow anywhere from $5,000 to $100,000, but the amount offered will depend on several factors, including:
You will also need to pay for application, ongoing, and discharge fees. The great news is that you may not be required to provide a deposit if you own property, such as a family home, investment property, commercial property, or a block of land. If you don’t, the deposit is still relatively affordable, usually ranging from 10% to 20% of the total car price. Some lenders will even let previous vehicle owners receive financing without a deposit.
Before applying for a car loan for the self-employed, make sure you can genuinely afford it. Budget accordingly to know how much you can pay during each scheduled repayment. If you have extra money to make extra repayments, ensure that you have checked your loan terms. Some lenders don’t allow early repayments, and others will charge you more for early termination of the loan.
If you plan to use the car for business purposes, think about the burden the additional cost will put on your business. Defaulting on the loan can cost you more and even lead to the seizure of your assets and business.
Low-doc car loans are indeed an excellent option for self-employed individuals. They are easy to obtain and may even provide balloon payment options of up to 35%. However, don’t forget that they come with higher fees and term restrictions. So, we recommend that you compare your lender options first before applying. Just because you are self-employed does not mean you should pay more on your loan.
Do you need help navigating consumer and commercial car loans? We’re here for you. Our specialist know-how allows us to offer clients tailored advice and options, so you get the most suitable self-employed car finance. Let us help you take the hassle out of your car loan. Contact Loans Unlimited today!
Loans Unlimited are Perth and Western Australia’s premier loan and finance brokers. We have helped thousands move towards their financial goals by offering lower rates and faster approvals when it matters. Financial services are provided by Total Biz Pty Ltd T/A Loans Unlimited ABN 78 624 937 882 ACL 506875.
* The comparison rate shown is for a secured loan amount of $30,000 over a term of 5 years based on monthly repayments. Warning: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.
Any calculations or estimations do not constitute an offer of credit or a formal credit quote and is only a calculation of what you may be able to achieve based on the information you have entered. It does not take into account suitable product features or loan product types. Rates + repayments shown are based on user inputted data. All applications for credit must be verified prior to the formal assessment process. All applications for credit approval are subject to lender credit approval. Approval is not guaranteed.
