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Canadian self-employed car buying tips

Canadian self-employed car buying tips

Since the onset of the pandemic, there has been a dramatic shift in the number of Canadians who are self-employed. The motivations to become self-employed were inspired by a lack of job security and people opting to work from home instead of returning to the office.

Buying a car when you are self-employed presents a unique set of challenges that our Binbrook auto loans team are going to help you overcome and save money in the process.

How lenders underwrite car loans in Binbrook

The term underwrite is a financial term, it simply means how the lender assesses the risks associated with a loan based on industry best practices.

Most banks are slow to adapt to the changes in the economy and their underwriting is geared to borrowers that are employed full-time.

These borrowers usually have a predictable income every month which the bank can use when determining the maximum car loan to offer, notice we used the word “predictable”.

Being self-employed, having a predictable income is not a simple calculation. You could have a large number of outstanding invoices from work that was already done but you are waiting on payment.

You have the “money” in the form of accounts receivable but the cash has not reached your account.

The banks have a hard time forecasting your income so they tend to make the underwriting needlessly complex by asking for bank statements, income tax notices, and a higher credit score.

All of these barriers are there to try and protect the bank but in reality, the full-time employed person could lose their job tomorrow and you could be in business for the next 50 years, this is where “predictability” goes out the window.

Importance of having good credit

Being self-employed, you need to have good credit, especially if you are a sole-proprietorship. If you have not checked your credit score in the last month or so, you can access it with apps like Credit Karma for free.

If your credit score is over 700, you will be able to qualify for prime auto loans  in Binbrook, but you will still need to meet the income verification process.

Should your credit score not meet this requirement, you will need to seek out experts in providing auto loans to self-employed Canadians.

Where to find self-employed auto finance experts

The good news is you do not have to look far, they are in your area. Your local car dealerships will be able to help you get a self-employed car loan, even if your credit score is less than ideal.

These dealerships have long-term relationships with lenders that specialize in underwriting self-employed auto loans.

These lenders do not advertise their loans online, so your only way to access these lenders is by going through your local dealership. Not only will these dealerships have the ability to get you approved for a car loan, but they will also have cars available in their inventory for you to test drive.

With the chronic shortage of new and used cars available in the market, you will have peace of mind knowing that all of your needs are being met in one place.

When you’re ready for a car lease or loan, get in touch with the Binbrook auto loan experts at Northway Ford for great deals on auto finance.

Categories: Car Loan

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