Can You Get a Car Loan if You’re Self-Employed?

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Can You Get a Car Loan if You’re Self-Employed?

Oxcel Finance
May 18, 2022

Those individuals that work for themselves or run a business can, at times, find it a little trickier to get different types of loans. Lenders like to see regular income and ongoing work to give them some degree of comfort that a borrower will be able to repay the loan.

A self-employed borrower will have an income, however, it’s likely not going to be as regular as someone who is paid a salary. With that in mind, there are still options that self-employed borrowers can look at, to get a car loan.

Lo-Doc Loan

A lo-doc loan is effectively a loan given to a borrower that doesn’t have as much income documentation as a regular wage earner would. When assessing an application for a lo-doc loan, a lender will want to see other forms of income verification such as an accountant’s letter, BAS statements or tax returns.

Given there is less evidence to suggest a borrower can make their repayments, the interest rate can be higher than a different type of loan product. It might be possible to offset this higher rate by putting up a larger deposit, or by securing the loan with the car.

A secured car loan means the car is put up as security which gives the lender an additional degree of comfort as their risk is reduced. If a borrower can’t make the repayments, they are able to sell the car to recoup any costs.

If you’re trying to get a lo-doc loan, it’s important that you have a good credit score, which means ensuring you’ve been paying off all your debts and bills on time in the past. A good credit score means you’re someone who can manage debts well and this should give the lender confidence that you will do the same now.

A Chattel Mortgage

If the car you’re looking to purchase is for business purposes, then one option you could look at is a chattel mortgage.

A chattel mortgage is a type of car financing for business owners. If you use a car for work more than 50% of the time in the day-to-day operations of running your business, you might be able to qualify for this type of finance.

The benefit of using a car for work is the ability to deduct some expenses from your taxes. However, it’s important to seek the advice of a qualified accountant prior to taking out this type of loan.

Business owners might not be protected by the National Consumer Credit Protection Act (NCCP), which could be an issue for some purchasers.