trulve asked:
I have just applied for an auto loan at a credit union in order to get a low interest rate. Problem is they keep saying I have insufficient income because they only look at my schedule C gross income which is after business expenses are deducted. Shouldn’t they be looking at the big picture? Like monthly income? Bank Statements?
Isn’t there a specific way to do self-employed loans differently? Are there loans specialized for the self-employed?
If anyone can suggest some info i would appreciate it!
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Don’t you keep record books? Ask them what they need. Lending to the self employed is very risky for lenders.
Auto loans – make them bid on YOU!
Your schedule C bottom line IS your income. They don’t look at what you brought over that amount – because it’s not money available for you to spend. It pays for the expense of doing business.
If you have other income – show it to them, whatever its source. You mention “bank statements”…if you have banking income – show them. If you have significant savings – use that to buy the car instead of taking out a loan.
And no, loans for the self-employed aren’t much different. They look at your income that appears on the front of your 1040, just like the wages that appear there on the wages line. That’s taxable income. That’s what they look at.
here’s why they don’t look at the “gross” at the top of a schedule C. Take the example of two self-employed people. One is a consultant, who pulls in $100,000 a year, and has almost no overhead, and no expenses. The second is a carpenter, or pulls in $100,000 a year, but pays out $20,000 in materials, and $40,000 for skilled laborers on the crew he uses to complete jobs he gets.
At the end of the day, the consultant has $100,000 in profit, but the carpenter has only $40,000. They both “brought in” the same amount of money, but they definitely don’t have the same amount of money at the end of the day, and there’s no WAY a bank would treat them the same in terms of loans.
Auto loans – make them bid on YOU!
3 years of tax returns is what you need to show.
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Just try they mention a 99% success rate, good luck.