6 Proven tips to get affordable car finance as a self-employed

If you are self-employed, you must wonder- Is it feasible to get car finance?

Well, if you do, you are not alone.

Over the past years, the number of self-employed individuals has been rising steadily. Thus, the demand for car finance is rising too.  

Despite huge demand, only a handful of self-employed get car finance. Why? It is simply because most lenders are reluctant to lend to individuals with unstable incomes. It is challenging to track the monthly outgoings compared to the fixed monthly income.

It makes it challenging them to decide whether or not they can afford the car finance. On top of that, one with bad credit makes it more difficult for the lender.

So, does it imply, “I can never get car finance as a self-employed?”

No, that’s not entirely true.

There are some ways to get a car on finance. But, again, it could be costly.

Thus, one must first analyse and prioritise ways to reduce the costs of buying a car on finance.

The blog states some ways to ensure affordable car finance as a self-employed. Yes, it is achievable if you know the car-owning purpose clearly.

How to get cheap car finance rates as a self-employed?

Being self-employed makes you independent. However, unless you rationalise owning a car, it remains incomplete.  To actualise it, you must work on the odds of securing an affordable one. Here is how you can do so:

1) Provide a large deposit

It is one of the best and most popular ways to qualify for a car finance affordably. Lenders that previously denied your application may consider it if you provide a deposit. It is particularly important for profiles with a low credit count. The deposit works as a security on the loan. It grants more power to the lender and reduces the overall loan costs. Isn’t it great?

You may consider this option if you have a sufficient amount in savings. It is for someone saving to own the desired car for a long. The lump sum you save can act in your favour here. Generally, the lender asks for about 10% of the car price as a deposit on the loan.

  • Reveal recently filed self-assessment

Self-assessment is a document that reveals to HMRC the total money you earned as a self-employed from multiple income sources. A self-employed usually files it every year. Lenders consider an important document before providing car finance. Moreover, it speeds up your tax filing process. Having one can help you claim different benefits.

The lender may consider the application if your recent self-assessment reveals enough potential to manage the car on finance. An assessment revealing a good number of projects, consistent revenue in months and limited expenses is an ideal one. Thus, work on it to get affordable car finance rates.

3) Ensure clarity of purpose

You must be clear on the motive behind owning a car for business purposes. Not having one may lead to immediate rejection. Analyse your existing lifestyle and business goals.

If you want to expand the business to different markets or need one to transport the goods, owning a vehicle can be an investment. Likewise, you may need it to attend meetings. Whatever it is, you must be clear on that.

4) Optimise your work and credit profile

Owning the car becomes easier when you have a sorted work-life balance. It implies-having lined up projects with timely payouts implies fewer debts. It works positively in a self-employed context. Alternatively, too many expenses without any project backup may work against the dream. It casts an irresponsible vibe on the loan provider. And ‘it’s definitely not ideal for your finances.

Thus, identify the best means to boost your business revenue. Leverage your networking skills to grab many projects under your belt. However, make sure you can manage the limit.

After streamlining the business front, jump on to the credit score.

It narrates the complete story of your recent and previous financial dealings and decisions. Thus, optimise it by paying the dues. Begin with the credit cards. If you currently lack the potential to pay, check loans for bad credit with no guarantor and no fees from a direct lender to clear the dues. It is apt because unpaid credit card bills lower credit scores, leading to bad credit. Here, a bad credit loan with no security and fee attached could help you get debt-free.

 Furthermore, pay the utility bills promptly and ensure a registered business ID and number. These aspects can help a credit score.

Most individuals use business credit cards for personal use. Avoid the practice. It is not only the car finance approval but credit. Thus, opt for a different card and account for personal use.

5) File a joint car finance application

If you do not yet qualify for self-employed car finance, check guarantor car finance. It is generally the apt option for young drivers and those with little credit history. Moreover, you can also tap it if your existing financials are insufficient to qualify for the loan.

In a guarantor car finance, the person acting as a guarantor is equally responsible for the payments. It implies that if the borrower lacks financial capability, the guarantor can attach his credentials to get the loan. It strengthens the loan application. Moreover, if the financials, expenses and credit score of the guarantor are good, you may grab low-interest rates and terms. Yes, it is one of the best ways to get affordable car finance as a self-employed.

6) Hold a relevant driving license

Generally, young drivers skip the driving test in their hunt to own a car before they turn 20. It is the primary reason that they do not get the licence.

If you are a young entrepreneur or a self-employed, hold a relevant driving license. Without it, you may not get the loan. A driving license reveals the experience you have with driving.

As per the country rule, you must share your legal driving license before applying for a car on finance. Lenders may reject the application if your license has been suspended or banned from driving.

Thus, analyse your prospects of securing a legal license. With stable finances, it helps you qualify for low-interest rates and terms on a self-employed car finance facility. Moreover, most positives in your favour grant you the freedom to negotiate the deal.

Bottom line

Thus, if you need car finance as a self-employed, you must work on these aspects. Getting an affordable deal without regular earnings is challenging. However, you can limit the negatives impacting the car finance approval by improving credit and finances.

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