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Securing a Self-Employed Auto Loan

Auto loans for people who are self employed are out there for the taking although they may be slightly different from those traditional loans. Typically lenders request that the borrower provide proof of regular and steady income for consideration. For the self employed person each week may be different in terms of work, income streams and security. Specially designed loans are available for self employed individuals. The interest rates, loan amounts and repayment schedules are uniquely tailored to meet the needs of people working for themselves.

What is common with self employed auto loans as well as any other type of loans is the language used to calculate the bottom line of the loan payback. The principle is the amount of money borrowed, the interest rate is the percent paid or earned per year for each year of the loan and the duration is the number of years of the loan. Understanding the language is the first step to securing a self employed auto loan.

For the self-employed, there are a few auto loan options that can be considered. With any type of loan, income verification is needed. This will help to determine which loan is best suited for each situation. Income may be verified by self certification which is a statement made by the borrower verifying their income or a lender may request that an audit of certain accounts, such as checking or savings be completed as verification of income. A credit report may be needed for one of both of these borrowing options.

Under payment or over payment options may be considered with self employed auto loans. These options allow some flexibility in month to month payments. If income is higher in some months you can pay more, if it’s lower you can pay less than others. There may also be the option of a payment holiday, which allows some payments to be skipped if necessary due to a decrease in business earnings.

If you have bad credit, or have in the recent past loans are still available, they may just be a little harder to secure. Interest rates are typically higher the lower your credit scores. The good part about these loans is that they often are approved quickly.

Self employed people are by the nature of their business a higher risk that those working through an employer. The higher the risk factor of the borrower the higher the interest rates will be. Typically rates range from 10% to 28%, the average being somewhere in the middle. For the self employed person applying for a loan, the more you can prove to the lender that you are not a risk the lower your interest rate will be. Because self employment is a greater risk most lenders will require a significant down payment on the loan and may range anywhere from 20-40% of the amount being borrowed.

There are options for self employed auto loans, many that provide flexibility that traditional loans may not provide. As with any contract, the specifics will depend on the lending institution you choose. As the self employed borrower you should always know your options and what may work best for your financial situation. Being informed will allow you to be well informed which is the first step to securing a self employed auto loan that you can afford.