10 Apr Beating the Self-Employed Loan Bias – How to Build a Home, Get a Car and Live Your Life
Choosing to be your own boss can be one of the best decisions people ever make. The freedom, the independence and the sense of satisfaction are unparalleled, but there can be some nasty surprises.
One of the most vicious is the realisation that even if you’re earning more money as a self-employed person than you were as an employee, you might not have access to the same easy treatment by the banks when it comes to a loan. This can be for a variety of reasons, but by and large hinges on the fact that as an employee, you’re pulling down a fixed income at regular intervals – and banks love that. It gives them a single, easy number to calculate your repayments against, and the certainty that you’ll still be pulling down something similar in 6 months, 12 months and 5 years. As a self-employed person, you don’t have that guarantee. It hurts to think about, but ventures can fail, businesses can lose market share and cash-flows can dry up.
But that doesn’t mean you’re locked out of finance. With some smart thinking, you can beat the self-employed loan bias and enjoy everything that life has to offer – plus the freedom of owning your own business.
Getting a ride of your own
It’s not the biggest purchase you’ll make in your life – we’ll get to that – but buying a car is definitely up there. With a quality used car costing around $10,000 – and a new one even more than that – it’s small wonder that as many as 20% of all new cars bought in Australia are under finance.
That’s great for people with easy access to loans, but for self-employed people and small business owners who have traditionally had difficulty accessing funds, what do you do? With limited access to both funds for a deposit and assets to serve as security, most of the interest rates offered to you will be sky high. As cash flow is such a concern for small business owners, you can’t afford to be laying out crucial capital each month on a loan that’s not doing you any favours.
If you can’t afford a loan but still need to drive to meet clients, visit job sites and do all the things that keep your business moving, what do you do? Simple, don’t get a loan, get a subscription. Carbar offers flexible, affordable and exclusive access to a vehicle, all the while taking care of all the little details. We look after servicing, registration, roadside assistance and insurance, so all you have to worry about is finding your next client.
Securing that all-important mortgage
Here it is – the big one. Getting a mortgage as a self-employed person can be a headache, but not when you work smart. The fundamental reason why so many self-employed people struggle to get a loan is that banks assess them as at a higher risk of default than someone employed on a permanent basis due to inconsistent income.
However, this isn’t the end of the world. While banks may consider a self-employed person to be a higher risk initially, this isn’t true in all cases. With as little as two years of employment history as a successfully self-employed person, many banks consider your risk level to be roughly the same as a salaried person on the same income. Choosing to be your own boss doesn’t mean never owning your own home – it just means being smart about it.
For more tips about living flexibly – whether you’re self-employed or not – sign up for Carbar today and stay tuned to our blog.