Many people have chosen to be self-employed and more so since the recession in 2009. In 2014, the Office of National Statistics released figures which showed that self-employment was at an all-time high since records began, with 4.6 million people working for themselves.
However being self-employed shouldn’t prevent you from getting car finance. It is true that it may be a little more complicated than if you were employed but the process will be straightforward if you have all of the necessary documents.
One of the main things you will have to do when applying for car finance whilst you are employed is to prove your income. The majority of lenders will require at least 3 months bank statements to prove your income. This is to see that your income is regular and you will be required to do this whether you have good or bad credit due to regulations by the Financial Conduct Authority (FCA). This is to ensure that the customer can afford the repayments and if they can’t demonstrate this then they will be seen as a high risk by the lender.
If you can’t prove your income there are a couple of things you can do to improve your chances of being accepted for car finance. Firstly, make sure your credit file is up to date and accurate. Secondly, make sure you are on the electoral register. This makes it easy for lenders to determine your identity and trace your address.
The type of employment will also affect your application. If you are a self-employed taxi driver you will not be able to take out car finance where the vehicle would be used for work purposes. This is because the car will travel many more miles compared to ordinary use and this means the value of the car will decrease at a much more rapid rate.
Another way to increase your chances of approval are to put down a deposit where possible – and the bigger the deposit the better. Not only will this increase your chances of acceptance, it will make your monthly repayments smaller. If you are able to use a guarantor or complete a joint application with someone who has very good credit, and is a homeowner, then this will also reduce the risk you are to the lender.
If you have bad credit and are looking for self-employed bad credit car finance, you may find it more difficult and have limited options. This doesn’t mean it is impossible! Check out our post on bad credit car finance for more information.