More people than ever are choosing to work for themselves and with the current COVID-19 pandemic still interrupting our day to day lives, self-employment is on the rise. For many people being self-employed is great! You can be your own boss and have more flexibility with working hours and workload! But what happens when you want to apply for finance? Does your employment status affect your chances of getting finance?
It’s a common misconception that being self-employed makes it really hard to get accepted for a loan or finance. However, there are a few ways in which you can increase your chances of getting approved. You may wonder how you will be viewed by a potential lender and how your employment affects your chances. There are a few ways in which you can increase your chances of getting approved!
Check your credit file.
The first thing you should do before you apply for any sort of loan or finance is to check your credit file. Your credit score isn’t the sole factor which helps to get you approved but having a better credit score can increase your chances of getting approved and also benefit from lower interest rates. However, if you are applying for car finance with bad credit there can be options available for you too. When you check your credit file, you should look for any mistakes and inaccuracies and check for any fraudulent activity. If you do see something that isn’t correct or a finance application that hasn’t been submitted by yourself, you can contact the credit referencing agency who provided your credit report.
Register on the electoral roll.
If you live in the UK and aren’t registered on the electoral roll then why not? Even if you don’t want to participate in voting in the UK elections, you don’t have to. However, being on the electoral roll can help establish your identity. Potential finance lenders use the electoral roll to verify that you are who you say you are and also verify your living address. Some lenders tend to prefer people who don’t move around as much so it can be really beneficial for you.
Proof of income.
When you’re applying for a loan such as self-employed car finance, lenders will use affordability to help get you approved and will usually request bank statements to prove your income. When you’re self-employed it can be hard to prove your income if you get paid cash in hand or if your income often varies. However, you can improve your chances of getting approved by paying any money you get cash in hand into a UK bank account which can be used to prove your affordability. Lenders like to see proof rather than just hearsay so depositing the money can be a great way to prove this. You can deposit the money and then take it straight back out if you need to.
Save up for a deposit.
You don’t have to put thousands down for a loan but having a small deposit saved up can be really beneficial. Even just saving up for a deposit for a couple of months before you apply for finance can in many cases help to get you approved. Having more money to put in for finance means you don’t have to borrow as much for the lender and can work favourably for you in the lender’s eyes. It also means that you will benefit from lower monthly payments and you’ll pay less interest in the long run.