BEING self-employed can have its disadvantages when looking for finance.

For example, when applying for car finance potential lenders will usually ask for proof of income with a few months’ worth of bank statements.

When you are self-employed, work can sometimes be varied or slow so you may struggle to provide documentation. For many, a car, van or motorbike is a crucial part of their business.

If you’ve been refused car finance in the past due to employment status, you’ll know how frustrating it can be. However, self-employed car finance isn’t impossible! 

Can I get self-employed car finance?

One of the biggest things that hold you back when applying for self-employed car finance is the ability to prove your affordability.

Whether you are a freelancer, contract worker, or business owner, you may have varied income or cash in hand payment.

Many finance lenders require you to pass an affordability check which usually requires proof of bank statements.

When applying for self-employed car finance, there are also a few other factors to consider, such as credit score and address history.

Car finance lenders want to make sure you will be able to make your payments on time and in full and don’t get yourself into financial trouble.

No car finance lender can guarantee finance to everyone and advertising ‘guaranteed’ car finance is unethical.

It’s not possible for a lender to say they can offer absolutely everyone car finance and guaranteed self-employed car finance can be misleading.

When applying for self-employed car finance, it’s recommended that you put your best foot forward before applying! There are a few easy things you can do to increase your chances of being approved for self-employed car finance. 

Credit score

Your credit score plays a big part in your car finance application. Potential lenders usually perform a soft search on your credit file and check your credit score.

A low credit score usually indicates that you’ve had trouble making repayments in the past and may have missed payments, been declared bankrupt, have a County Court Judgement (CCJ) or entered into an Individual Voluntary Arrangement (IVA).

Having a higher credit score can increase your chances of being approved for self-employed car finance. However, applying for bad credit car finance isn’t impossible either. There are many options for self-employed car finance with bad credit.

Affordability and income

Most lenders will require 3 months’ worth of bank statements to prove your income. If you receive cash in hand, it’s a good idea to have a UK bank account and deposit your earnings for at least 3 months.

Some lenders will total the amount of income and then divide it by 3 to get a more accurate idea of your monthly affordability. If you have a bank account in a spouse or partners name, you may also need to add them to your car finance application as a joint application.  

Electoral roll

Many self-employed applicants overlook the power of the electoral roll. Registering on the electoral roll can increase your credit score as it enables lenders to confirm you are who you say you are and check your address history.

Lenders sometimes favour applications who don’t move around as much as they tend to be more settled. 

Avoid multiple applications

If you are applying for self-employed car finance, some finance companies will perform a search on your credit file.

A hard search is recorded on your credit file and will be visible to potential lenders. Making multiple hard searches in a short space of time can negatively impact your current credit score and also indicates to potential lenders that you are desperate for credit.