Self employed persons face a number of issues while applying for car loans. Things can get even more difficult for persons with a bad credit history. We, at Valley Auto Loans have handled hundreds loans for the self-employed successfully, and today we are revealing how these borrowers can overcome issues that often restrict them from qualifying for auto loans.
At the very beginning, every self employed borrower should be aware of the qualification issues that they are most likely to face. The most common problem faced by the self employed individuals is proper documentation of their income. There are many dealerships who now offer specialized services in auto financing for self-employed borrowers with not so impressive credit history. However, these companies also have some basic requirements for applicants. A minimum monthly earning between $1500 and $1800 is a requirement with most of these companies. As a result, a minimum annual net profit between $18,000 and $21,600 needs to be reported by all self employed applicants.
Many car loan applications from self employed applicants with sufficient net profit are turned down if their reported income and monthly expenses are out of proportion. As an example, a monthly expense of $1800 is reasonable for someone with an actual monthly earning of $3500. However, approval chances can be dented badly if the person reports a monthly expense of $2000.
The self employed borrowers must be aware of the fact that their DTI or the debt-to-income ratio is calculated by the lenders on the basis of their income as stated in their IRS tax form. Most of the lenders also ask for a copy of the Schedule C of the 1040 IRS tax returns for the previous two years while receiving their application. Many self employed applicants often make the mistake of reporting incorrect monthly income. This will seriously affect the approval chances for them.
Before applying for an auto loan, self employed persons with bad credit should also be aware of the fact that their rates of interest is most likely to be more than that offered by the same company to the salaried borrowers. Those interested in keeping their interest rates within a manageable limit can consider making a higher down payment or finding out a cosigner who has a decent credit history.
Fortunately, there are many lenders that offer car loans for self employed persons without any strict conditions. Applicants should try to receive quotes from many such companies using online search and compare them thoroughly. However, a much easier alternative would be to approach Valley Auto Loans with your car loan related requirement. Most of our customers get approved for incredibly low interest car loans within just one minute regardless of their credit history.