Financing offers for motor vehicles often have more favorable conditions than normal installment loans. This is mainly due to the credit protection through the reservation of title, because the registration certificate Part II (car letter) is kept by the financing company until the loan has been fully paid off. Nevertheless, it may be difficult for self-employed and freelancers to obtain such a loan, because they need a car loan with no proof of income. Despite the retention of title, most banks and credit institutions demand a secure income to lend.
What to do if the proof of income is missing?
In contrast to workers who receive monthly payroll bills, self-employed and self-employed people have few opportunities to prove past and future income. As a self-employed person, you are practically your own boss, which certainly brings with it its advantages, but makes banks suspicious. Because they also have the macroeconomic situation in mind and assume that self-employed as freelancers are among the first who have to accept income losses in economically unstable times, as there are usually fewer reserves than in companies.
Consequently, the creditworthiness and thus the prospect of a car loan without proof of income decreases, which in this case does not even mean that the applicant has a low income. The exact opposite could also be the case. In order to prove this, banks often require a business evaluation, BWA for short, in order to be able to get a better idea of the income situation of the applicant. It can also be documented by means of income tax assessments, which, however, only makes up half of what is important to the bank. Because all of this data is related to the past and can only guess what income will come. However, this income should be used to secure the loan.
In addition, to improve the bank’s chances of having a car loan with no proof of income, it is important that there is no negative bad debt entry with the borrower. Because a debt service has to be provided already, the rejection is as good as preprogrammed. Whether or not credit bureau entry, it is always helpful to involve a third party in the contract. This person may provide additional collateral in the form of a guarantor or co-applicant, if any. Because both need that, what the bank so far for a commitment was missing: the regular income.
Is the income and thus the necessary collateral available, is the car loan without proof of income little more in the way. The co-applicant is responsible for ensuring that interest and principal payments are paid on time and in the agreed amount throughout the term. He is thus liable from the beginning on the sole responsibility. The situation is different when it comes to guarantors. This is only taken into account if the applicant can no longer fulfill the debt service.
With a deposit to car loan without a proof of income
Many auto banks offer self-employed and freelancers another way out. If a down payment in sufficient amount is made in advance, it is generally not taken with the regular income quite so exactly. The amount of this down payment is usually between 30% and 40% of the purchase price and is ideally financed with the sales proceeds from the old car. This also brings with it the advantage that the terms altogether cheaper, since the Autobank bears little risk in this process, because the retention of title is still valid.
In addition, there are, albeit rarely, offers on the market in which it only plays a subordinate role, whether the income from self-employment or non-self-employed work is generated. For a car loan without proof of income, this obviously appears as a particularly favorable case without significant complications. Nevertheless, the conditions should always be compared with similar offers.