How to get car finance when you’re self-employed 

For many people being self-employed is great! You can choose the hours you work, how much work you take on and have more flexibility! However, being self-employed can come with some financial challenges.

It can be hard to prove your affordability for when applying for self-employed car finance and some lenders may decline you based on your employment status. Luckily, there are a few ways in which you can increase your chances of getting approved for self employed car finance.

1. Have proof of income

The majority of finance lender will require 3-month bank statements from anyone who applies. This is to ensure that you will be able to meet the repayment deadline and pay back your loan. If you frequently receive cash in hand, you should deposit any payment into a UK bank account which is held in your name. You can do this prior to your car finance application to increase your chances of getting approved.

2. Check your credit file

Any type of finance or loan will usually require you to pass a credit check before you are accepted. If you are self-employed and looking for finance, you should check your credit file before you start applying. You can check your credit file for free and see what your current credit score is.

You should make sure all the information listed on your credit score is accurate and up to date. If you spot any mistakes, this can negatively impact your credit score and your ability to get accepted. Put your best foot forward and contact the company who provided your credit file to remove negative items from your credit report.

3. Put down a deposit

Having a deposit to put down for car finance can make you more favourable to lenders. It means that you don’t have to borrow as much from a lender and indicates good financial responsibility. It can also help you to lower your monthly payments which helps save you money in the long run.

4. Consider a joint car finance deal

If you are struggling to get approved on your employment status alone. You could consider a joint car finance application. A joint application for car finance is when two people apply for finance on the same vehicle. Both parties will be responsible for meeting the repayment deadline and they will then become financially linked on their credit files. It can increase your chances of getting approved for self-employed car finance as it gives the lender more confidence that the loan will be paid back on time and in full.

5. Register on the electoral roll

It’s important for any finance dal that you can be verified and traced by finance lenders. Many finance lenders use the electoral roll to verify your identity and your address. This helps to reduce fraudulent applications and also lenders tend to favour applicants who don’t move home as often.

6. Consider what the car will be used for

If you’re looking to get a self-employed car finance for a car which will be used for business purposes, you may be better off opting for a Hire Purchase finance deal.

This is because unlike PCP deals, there are no mileage restrictions and no additional charges for damages. Lenders will usually ask if the car will be used for personal or business use upon application. Business vehicles tend to experience more wear and tear than personal use. However, it is worth exploring all finance options depending on your budget and intentions.

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