Getting a car loan when you're self employed

Lenders look at a variety of things when you apply for a car loan, including your employment status and how long you’ve been in your job. 

If you’re self-employed or just entered a new job, you might be wondering how you can get a car loan. Here's a quick overview of how you can get a loan: 

Find the loan product that best suits you 

As with any financial product, you’ll want to explore the market thoroughly. As a self-employed applicant for car finance, you’ll want to pay close attention to the following: 

Interest rates 

As with any loan product, the interest rate you will pay is normally the most significant factor in determining the overall cost of the loan. 

When you’re self-employed, most lenders will require you to provide at least two years' worth of tax returns sufficient to demonstrate whether you can service a loan or not. However, if the nature of your self-employment means you are not able to provide conventional proof of income, a low-doc loan may allow you to use alternative means to demonstrate your ability to pay off your loan. Take note, low doc loans tend to be associated with higher interest rates. 

Restrictions 

You’ll want to make sure your lender does not have restrictions that could impact self-employed borrowers. Many lenders may not provide a car loan for a self-employed applicant if the ABN of the business has been registered for less than one year, for example. You might also be limited to a shorter loan term or a lower maximum amount. 

Loan repayment options 

Some loans are flexible when it comes to making additional payments to pay off your loan. If you are self-employed, your income might be more erratic than receiving a regular paycheck. In this case, you might want to be able to make overpayments when you have surplus capital (just received payment for a big job, for example) to cover yourself for the slower months when your business isn’t generating as much cash flow. If this is the case, it’s important to select a loan product that allows for this flexibility. 

Submit your application 

When you apply for a car loan, the lender will assess your ability to repay the loan. They will look at your monthly expenditure, outstanding debt obligations and your income. If you’re an employee, proving your income is straightforward as you can provide copies of your last few payslips. However, as a self-employed applicant, you will need to provide alternative evidence of your income. This generally includes tax returns for the previous two financial years or financial statements.  

Lenders might ask for additional information on top of these to completely verify that your income is what you say it is. If you are unable to service a regular car loan as a self-employed applicant, you may wish to consider going down the low-doc loan pathway to achieve your goal. 

How long do you have to be in a new job to be eligible for a new car loan?  

For a loans.com.au car loan there are different requirements based on your type of employment. The three different categories are: 

• Permanent Full or Part Time: Six Months 
• Casual: 12 Months 
• Self-Employed: 2 Years 

Tips when submitting your car loan application 

There are several steps you can take that can improve your chances of getting a loan when you are self-employed. 

Improve your credit score 

Lenders will assess the credit score of any applicant, regardless of their employment status. If you are self-employed, a good credit score is a great way to show your lender that, despite your irregular income, you can repay your debts. 

Consider a secured loan 

If you already own an expensive asset, such as real estate, many lenders, including loans.com.au, offer equity releases on your existing home, which can be a useful tool depending on your financial situation, allowing you to purchase a new car. 

Keep your business records organised 

If you keep your business records up to date and organised, you can make it easier to gather proof of your income when it comes to applying for a loan. 

Talk to us about your next car loan 

If you’re in the market for a car loan, loans.com.au offers competitive rates on the market. If you’re self-employed or newly employed and wondering whether you’ll need to jump through any extra hoops to prove your ability to repay the loan, you can speak to one of our lending specialists, who will be able to walk you through the process. 

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