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Self-employed? Here’s how to get a work car loan

Self-employed? Here’s how to get a work car loan

Got your sights set on a Brand-New Mazda BT-50 but paying outright isn’t an option for you?

As a self-employed tradie, it can be tough to access finance without being able to prove to a lender that you have regular income payments.

That’s because lenders may see you as a risk, when in reality, you know you can afford the repayments.

But a ‘low doc’ loan could see you test driving a Mazda BT-50 at your local dealer in no time.

Low doc loans, or low document loans, are loans which allow self-employed Aussies to get approved for finance without having all the necessary financials. They were created to help business customers get loans, because lenders know your tax return doesn’t always accurately reflect your take-home pay.

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How do low doc loans work?

It’s in the name: low doc loans allow applicants to show less paperwork, and still gain access to finance.

Instead of asking business owners to provide traditional proof of income, like payslips, lenders will ask you to provide things like your Australian Business Number (ABN), evidence that you’ve been self-employed in the same industry for at least 12 months, and your latest Business Activity Statement (BAS).

They also provide significant tax breaks.

If you’ve got a registered ABN, low doc loans allow you to claim the interest on the car loan on tax. If you’re also registered for GST, you can claim the GST portion within the purchase price of a car in your next BAS.

Depending on the lender, if you own property, you may even be exempt from providing a deposit on the loan.

However, not all lenders will provide low doc loans, so you’ll need to shop around.

What are the interest rates on low doc loans?

Like any loan, you should always compare multiple lenders to ensure you’re getting the best rates.

You can use comparison sites like Finder.com.au to compare rates for low doc car loans.

It’s important to note that because these kinds of loans carry a higher risk, they tend to attract higher rates than other loans.

According to Finder, car loan rates tend to sit around the 5 per cent mark, so you can use that as a benchmark when considering a low doc loan.

Other loan types for work cars

Low doc loans aren’t your only option for purchasing that Brand-New Mazda BT-50.

You can also opt for a chattel mortgage - so long as you intend to use the car for work at least 50 per cent of the time.

Like a mortgage on a house, a chattel mortgage lets you take ownership of the car, but the lender retains a registered interest on your car. When you finish paying the car off, the lender no longer has the interest in it.

The main benefit of a chattel mortgage is that even if you don’t have the perfect credit score, you’ll likely still be approved for the loan.

There are some tax benefits to this kind of option too: you may be able to claim interest and depreciation costs as a tax deduction.

However, the regulation around chattel mortgages isn’t as strict, so you’ll need to do your research on the lender, and ensure you understand all the terms and conditions of the loan.

NB: This information is a guide only. It’s important to seek your own financial advice or engage the services of an accountant before making any financial decisions as individual circumstances may vary.