Criteria To Consider Before Availing Self-employed Auto Loans
Well, let me first congratulate you. In an economy plagued by unemployment and debt, it takes great courage to venture out on your own. A self-employed individual not only earns for himself but also provides the same opportunity to others.
"Everything in life is somewhere else, and you get there in a car" - Mr. E. B. White
We all have to agree that a car is no longer a means of comfort or luxury. It has become a need for us. But buying a car has become very expensive. A FINANCED car is the only reality now.
So before you search for auto loans, you should be aware of the two types of loans offered:
1) Secured Auto Loans
When a lender provides you with a secured loan, you will have to pledge your assets as collateral. Your home, car, stock, bonds, etc. can be pledged against the loan.
2) Unsecured Auto Loans
An unsecured loan is obtained without any collateral. Hence, you will be charged with higher interest rates. When you avail an unsecured loan, you will have to prove your earning capacity. This will ensure the lender of regular payments in future.
What are the requirements for availing Self- Employed Auto Loan?
Constant Income
A W-2 employee can prove his earning capacity by showing his pay check. But, you are self-employed and you obviously don't write pay checks to yourself. So, it becomes a bit difficult to prove that you get a steady income every month.
As you are self-employed, you will have to fill the following forms:
>> Form 1040 (U.S. Individual Income Tax Return)
>> Schedule C (Profit or Loss from Business)
>> Schedule SE (Self-Employment Tax)
You can solve the problem with the help of these tax forms. You should provide at least three years' record of your tax returns. This will assure the lender of your REGULAR income.
Many self-employed individuals write off their profits to reduce the tax burden. But make sure that YOU show the actual profit. A robust profit will ensure the lender of your stability and therefore you will have to pay lesser interest.
Bank Statements
You will have to show your monthly bank statements. Few lenders may want to see your personal accounts and also want to verify your personal assets.
Your Residential Proof
A constant place of residence means you are able to pay your rent and other utilities on time. This shows your stability and instills greater confidence in you.
And so, the lender will require a copy of your recent Mortgage Statement and Utility Bill.
Credit Rating
Even if you are self-employed, your credit rating matters. Your credit score will show your credit worthiness to the lender. If you have a better score (generally 600 and above), then you have a greater chance of getting your loan approved.
Recommendation From Your Clients
Lenders want to ensure the stability of your business. So they might ask for recommendation letters from your clients. If your client writes it on his Company letterhead, it will prove to have more impact.
These are the major things that your lender will ask from you. The requirements may vary depending on the type of loan you are availing. Unsecured car loans will apparently have more criteria than the secured loans.
If you are a self-employed individual with a good credit score, availing loans won't be difficult for you. You just need to have accurate financial records and soon you will be driving your very OWN car.
There's time enough, but none to spare.
So don't wait. Go online and search for a lender who will value your credentials and give you a loan instantly.
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