Getting financed for a vehicle purchase can be a little tricky if you're self-employed, especially if you have less than perfect credit. However, it can be accomplished if you are able to provide the correct documentation.
Verifying Your Income
If you have an excellent credit rating, you won't have to worry about showing proof of income in order to be approved for an auto loan. But, if you have bad credit, you will only be able to get financing if you are able to verify that you earn a qualifying income.
- Gather your last two years of tax returns. Whether you own a business or are otherwise self-employed, it's important to keep your tax returns organized and accessible. If you don't receive paychecks, your tax records will be requested by lenders whenever you need to borrow money. It's also a good idea to keep these documents on-hand in case you are ever audited.
- Be mindful of your deductions. Those who are self-employed are able to take advantage of tax deductions that are unavailable to those who are employed by companies. And it is likely that you do have a lot of business expenses to consider. However, the amount that you have deducted cannot be counted as taxable income, so having too many deductions can harm your loan approval chances.
If you have well organized tax returns that show you regularly earn a taxable income that is at least $1500-$1800 a month, your approval odds will be much better. However, before you apply, go over your finances and make sure that your debt to income (DTI) ratio is balanced. This refers to how much of your income goes towards recurring bills. For example, even if you make $10,000 a month, if you owe $9,500 to creditors every month, your DTI ratio will likely disqualify you for financing.
Other Required Documents
In addition to your past two years of tax records, you will need to gather a few other documents before applying for your auto loan. Be prepared to show:
- Proof of residence (a recent utility bill).
- A copy of your most recent phone bill.
- A list of personal references (usually a minimum of six).
- Complete landlord information (or a copy of your most recent mortgage statement).
Getting all of these necessary documents together ahead of time and presenting them in an organized fashion will communicate to a lender that you're a reliable borrower who takes the purchase seriously. Remember that you only get one chance to make a favorable first impression.
The Best Financing for Every Situation
If you are a self-employed car buyer who happens to be struggling with credit issues, Auto Credit Express can help you purchase the vehicle you need. We will connect you with a dealer who is qualified to work with your unique situation.
Just fill out our fast and secure online application to get started today.
And if you are self-employed and are interested in having access to extra funds for home improvement, moving expenses, education needs or for anything else, click here for personal loans that are available for all credit types.