When running a business, you have a variety of challenges that you need to overcome. If your business requires a vehicle then getting a loan for a new car can be difficult unless you arm yourself with the right tools.
Our Kitchener auto loans team explains a little more about car finance for your business. It’s not as complex as you might think!
What is your business classification?
Are you operating an incorporated business or sole-proprietorship? There has been a shift in the number of Canadians that are starting businesses, if you are one of them then you should think about whether to incorporate or operate as a sole-proprietorship.
If you are running as a sole proprietorship, there is a fair amount of paperwork that is going to be involved in underwriting your loan.
Understanding auto loan underwriting
Auto loan providers in Kitchener are starting to adjust their underwriting guidelines when dealing with self-employed borrowers but there is still have a ways to go.
The lender has to determine your total income and then use that to work out what is your total debt-to-income. This is a ratio that compares your income to total debts to determine whether you can service a car loan.
A challenge with self-employed applicants is their income can vary due to the nature of their work. To address the lender’s concerns, you should bring your bank statements and the latest income tax notice of assessments.
A note of caution, if you have unpaid taxes then your loan application could be turned away. There are quarterly installments that must be made but we are talking about unpaid taxes from previous years.
Are you financially responsible?
This is the next question the lender must answer when trying to decide on whether to make a loan offer. The only way a lender can know if you are financially responsible is by looking at your credit score. Based on that number, the lender will know whether to approve the loan and if approved at what interest rate.
Prime interest rates which are offered by the banks would require a credit score of over 700. If your credit score is below that you can still get a car loan but you will need to pay a higher rate through a 3rd party lender.
Locking down the best rates
The only effective way you can get a competitive self-employed auto loan in Kitchener is to get help. While most entrepreneurs tend to be independent and try to do everything on their own, this is one task you need to delegate to the professionals.
You can easily find these experts by contacting your local car dealership and having them assess your credit and financial situation. The dealership has the expertise to advise you on how you can fix your credit, by doing simple yet effective things like paying your bills on time.
The same dealership can speak to the lenders on your behalf and haggle down your interest rate. These value-added services are why you should only deal with a local dealership when trying to buy a vehicle for your business. Once you have a relationship with the dealership, you will have a much easier time buying cars in the future.
For those of you who know that you have a challenging credit situation, please visit Dixie Auto Loans where we have a team of credit specialists ready to help you get approved for a car loan today!
For any questions or concerns, please don’t hesitate to contact us here!