Can you still get a car loan if you’re self-employed? The short answer is yes! However, the range of finance options may be limited. The loan application requirements may be more stringent, making it more challenging to receive loan approval.
If you want to apply for a car loan, it’s best to do your research beforehand. Read on to learn about the options available, minimum requirements, restrictions, and what to do when applying for a car loan while self-employed.
What are the car loan options if you’re self-employed?
You have a few options to choose from when it comes to car loans, even if you’re self-employed. Each car finance solution offers its own pros and cons, and loan requirements may vary. It’s best to understand what you’re looking for in a car loan and what your plans are for the vehicle.
Common car loans for the self-employed include:
Personal car loans
These are categorised as consumer loans ideal for those who are buying a vehicle for personal use. There are also different types of personal car loans, such as secured or unsecured and these usually come with a fixed or variable rate.
Personal car loans offer a lot of flexibility and may offer customisation based on the kind of car finance you choose. These loans can come with features such as balloon payments and redraw facilities, depending on the lender.
When applying for a personal car loan, lenders typically require documents such as identification, proof of income, and copies of your assets and liabilities.
Business car loans
As the name suggests, these loans are used for those buying a vehicle for business purposes. There are a few types of business car loans, like a chattel mortgage and a commercial hire purchase agreement.
These loans could benefit sole traders, entrepreneurs, sole company owners, and the like. As long as the vehicle you’re planning to buy is used for business, a business car loan may be a good option.
The requirements and eligibility criteria for business car loans vary per lender. Often, loan applicants are asked to submit their tax return, business financial statements, business activity and trading for the last 12 months, and an Australian Business Number (ABN).
Low-doc or no doc car loans
These are often the most popular options for people who are self-employed because the requirements aren’t as strict.
For these loans, the borrower won’t have to provide as much paperwork as typically required when applying for a car loan. This can be helpful for self-employed people, as they often don’t have the necessary documents that normal employees have, like pay slips.
Low-doc and no doc car loans often have higher interest rates as they are considered higher risk by the lender. This is because they have less financial information and are getting a less rounded picture of your finances. These loans may also be more restricted in the loan length, loan size, and the ability to make extra repayments.
How to apply for a car loan while self-employed
The application will differ between lenders and your situation, but the following process will give you a rough idea of what it might look like:
- Decide on a loan type (low-doc, chattel mortgage, commercial hire agreement, consumer loan).
- Evaluate the market and decide on a lender that best suits your needs, as well as a loan that does the same.
- Submit the relevant paperwork the lender requires (such as proof of ID, details of the car, proof of income, tax statements, and other business details).
- Wait for the lender to evaluate your loan application. This could take anywhere from 24 hours to a number of weeks or so.
- Provided the lender approves your application, they will arrange and provide the necessary funds so you can purchase your new vehicle.
Loan applications can be stressful, especially when you’re unsure about the process and requirements. Often, self-employed borrowers are asked for additional documents, which can add to the stress and delay the application.
If you’re looking for a hassle-free way to get a car loan, consider getting finance through CarLoans.com.au. With the help of our car loan specialists, you don’t have to worry about complicated loan processes. All you need to do is tell us what you need, and we’ll help you guide you through your options. Call 1300 889 669 today or get a quote online!
Are there any restrictions when applying for a car loan if you’re self-employed?
This depends on the lender and the kind of loan you’re applying for. Low doc and no doc car loans typically come with greater restrictions than a regular loan. If you want to make extra payments, for example, you may not be allowed to under a low doc or no doc car loan.
It's best to speak with the lender about the features and restrictions of certain car loan products before submitting your application. Or you can speak with our expert car loan specialists using our LiveChat feature to better understand your finance options.
Disclaimer: The information in this article is general in nature and does not constitute financial or legal advice. Please seek independent professional advice tailored to your individual circumstances before making any financial or legal decisions. Note that loan eligibility is subject to individual lender assessment and criteria.