Are you looking to apply for a car loan? For most people, this is a straightforward procedure that involves a little paperwork. For someone self-employed, it's an entirely new ballgame. Requirements are a lot stricter, especially for loans in Australia. Instead of being blindsided by what's expected, use these 7 tips to get ahead of the problem.
1. Bring Proof Of Income
Proof of income is required no matter how much money you want to borrow. Borrowing money is a big deal, and self-employment adds a layer of mistrust. Since you are your own boss, it is your responsibility to show that you have all affairs in order. Imagine a traditional business asking for money but not having a record of what they pay employees. It is off-putting, and leads to instant mistrust.
2. Keep All Of Your Relevant Tax Forms
Tax forms are your lifeblood when getting a loan. They are an extra layer of information that shows your proof of income. Taxes are also a way to check the validity of a business, and the quickest way to know if an applicant is lying about numbers. Lying on your loan application and then providing your real taxes will get you nothing, and is highly illegal. For obvious reasons, when providing your taxes it is smart to stay within the boundaries of legality.
3. Proof Of Residence
Don't get discouraged if you work out of your apartment. A lot of self-employed workers feel that an apartment is a black mark on a loan application. Putting in a P.O. Box or the address of a home you don't work at is worse, and can lead to a denied application. The people that are signing off on a loan will be more interested in identifying your financial information. As long as your home location receives mail, then the actual location is useless information.
4. Good Credit Is Important
Good credit is a gold mine, and something that should not be taken for granted. But that doesn't mean you are guaranteed an approved loan! Good credit gets you through the first phase, while ability to pay back the loan gets your application completed. There are plenty of people with good credit that have been denied their loan terms. And on the other side, plenty of people with bad credit get their terms approved. Every individual has different terms they're going for, so think of the credit rating as a way to crush a first impression. If you can get past that first hurdle, then you've already beaten out the majority of other loan applicants.
5. References Are A Plus
Even if a loan application doesn't ask for references, you should still list them. Preferably, people with good credit make great references. This comes into play later if you are denied your loan application but given the option to use a co-signer. Be proactive by providing extra information that will help your case. If the loan company is unsure about whether to approve you, references can be the last bit of information that puts you over the top.
6. Be Polite
Be polite! As a self-employed worker, you will be asked for a lot more information than a normal business. This is normal, although it can feel invasive. Being rude to the person that is in charge of your application is not a good idea. They are simply doing their due diligence, but more importantly they're doing a job. A company that loans money is always taking a risk, even if it is a small amount. Stay alert and keep the attitude and sharp breaths to a minimum.
7. Consider Co-Signing
When you get denied for a loan, the option for co-signing becomes a possibility. Keep in mind this puts both yourself and another individual on the hook for the loan. When using a co-signer, always be sure to talk over finances in advance. This is no different than going into business with someone, so treat it like a transaction. With a co-signer, you are asking the loan company and an individual to put their reputations on the line for you.
Wrap Up For Self-Employed Workers
Loans of any kind can be tricky when you are self-employed. Make it a point to understand what's required on your end by doing proper research on car loans. There is no such thing as being overly prepared when money is expected to change hands.
Eric Reyes is a passionate thought leader having been featured in 50 distinguished online and offline platforms. His passion and knowledge in Finance and Business made him a sought after contributor providing valuable insights to his readers. You can find him reading a book and discussing current events in his spare time.
