Being self-employed gives you a lot of flexibility, freedom, and the potential to earn decent coin. But getting a car loan is certainly more challenging for a self-employed person than a regular employee.
Regular employees pay their taxes out of every salary and get a W-2 form for each tax year. When you’re not a salaried employee, financial institutions tend to ask for some additional documents to prove that you can afford a car loan and will be able to make monthly payments.
Getting Approved For Self Employed Auto Loans
If you have bad credit, are self-employed and have bad credit at the same time, financiers will ask you to provide proof of income in order to approve a loan.
They will usually ask for stubs in case of a regular employee, but since you’re not a salaried employee you will need to submit copies of your tax returns. The financiers may ask for tax returns going back two years and bank statements, to check if you have a regular cash flow.
They normally look at these criteria: monthly income of $1500-$2000 after deductions, 45-50 percent of debt to income ratio, and 15-20 percent of payment to income ratio.
Also, keep in mind that financiers will only take into account your net profit after deductions as your gross income. So keep this thing in mind when you’re calculating your income.
Where To Get Self Employed Auto Loans In Martinsburg WV
Dealerships that use subprime lenders, are the best to go to when applying for self employed auto loans and have bad credit. Subprime lenders give you the opportunity to rebuild your credit with a car loan as they report to Credit Bureaus.
If you’re in the Martinsburg WV area, you can visit Bad Credit Car Search to access both subprime loans and buy here pay here financing options.
If your car loan was rejected by a subprime lender, you can opt to go to a buy here pay here (BHPH) dealership. BHPH dealers offer in-house financing, so you can drive out in the car of your choice the same day.
These dealerships are great for fast financing, and they generally don’t check your credit score to approve your loan, as it’s based on your income. Since they don’t base the loan on your credit, most don’t report to the credit bureaus.
This is the reason your credit score won’t improve when you go to one of these car dealerships. One other thing to keep in mind is that the type of vehicles these dealers have are generally older and have high mileage. You won’t probably get your dream car at a BHPH dealer.
There are a lot of options in the market nowadays for self-employed people. If you have a good credit score, you can also go for a conventional auto-loan and institutions don’t even demand anything more than tax returns and bank statements.
It is always best to do some research on your own and ask for quotes from multiple lenders to compare interest rates.