Self Employed Loans

andyward82

Hi. I'm a freelance designer. I run a limited company - VAT registered with a business bank account etc. I work full time myself and subcontract out to other freelancers also. My company turns over a decent amount of money and my income (gross) is around £100k-£120k. The company has been running nearly 4 years now.
I recently decided it'd be nice to treat myself to a new car. I have a trade-in car which has 10k left on the loan (not directly linked to the car - not 'car finance' but a personal loan). The car I want is £37k. So, I thought I'd get a loan enough to pay off the old loan, then a new one for the new car - with me also putting £8k into it). So essentially I'd like a loan for £22.5k. My Experian rating is 999 and Noddle is 640+ so I should be absolutely fine with regards to credit score, etc.

When applying for loans I understand that technically I'm 'employed' by my own limited company even though I'm self employed yet when asking for proof of income the lenders are asking for PAYE slips. Of course I'm paying myself £680 a month and the rest in dividends but when I mention this to the lenders they're saying "we only take PAYE slips into account" and despite me saying I can 'prove' my income with bank statements and stuff they are not interested.

I'm not sure here what my choices are? Although 'employed' by my own company do I need to declare myself as 'self employed' and apply this way?
Seems a bit basic by my original accountant (who I've changed from since) told me that I should declare myself 'employed' and not 'self employed' so I'm confused.
Any help / advice much appreciated.

[Deleted User]

You'd put employed.

Lenders don't look at your credit scores when assessing you for credit, as they're made up and not a reflection of your credit worthiness, so make sure you check your three credit files to see that everything is in order.

Your income is likely to be an issue though. Is it an option to put it through the business?

andyward82

Thanks for responding.

I've checked everything indeed. I have 4 credit cards but I've paid them all off. I have a mortgage of £685 a month and the existing loan I'm going to consolidate which is £320 a month. Other than that I have no debts at all.

Seems very strange....

andyward82

Oh and I do hardly any miles for work and it'll be a used car too so not VAT breaks, etc.. so I think that makes it not really a viable option?

[Deleted User]

You could probably do with improving your credit history.

The existing loan increases your risk and you should make sure you use at least one of the cards regularly, clearing in full each month.

DCFC79

Your Experian rating @ 999 and Noddle @ 640+ aren't seen by lenders, they see your credit history.

Bermonia

Ignore the posts about credit score as this irrelevant, the issue for you will be affordability given that your mortgage repayments are more than your declared income (PAYE).

I would suggest speaking with the bank you hold your business accounts with, if you have a relationship manager they should be able to help you sort something out in terms of a personal loan.

Thrugelmir

andyward82 wrote: »

So essentially I'd like a loan for £22.5k. My Experian rating is 999 and Noddle is 640+ so I should be absolutely fine with regards to credit score, etc.

Not just credit score but affordability that matters. What's the outgoing a month to service the £22.5k loan?

trailingspouse

We're in exactly the same position - OH and I run a successful Limited Company, taking a combination of salary and dividends as income. I applied for a loan to replace my car about a year ago - I got mine through Santander (our personal account is with them) - I didn't have to supply any wage slips. In fact if I remember correctly I did it all online. The loan was for £15,000, which together with the trade in on my previous car bought me a very pleasant Jaguar XF.
I often find it's hard to get people to understand (even people who ought to know what you're talking about, like bank employees!) that you are the owner of the company that employs you. And that therefore you are an employee.

andyward82

Thanks everyone for the help. Financially I have a lot (relatively) of excess money each month but I guess it's just proving it to these people. I don't have any credit card debt any more - even though I used to but have cleared everything within the last year. I repaid the only loan I had left early recently also and cleared that. The only debts I have are my mortgage and the existing loan. On paper I generally have about 4k per month completely spare after tax. Perhaps more. Frustrating really. I've applied to Sainsbury's who I have the existing loan with (and obviously a history of on-time full payments) and hopefully because of the existing relationship they may not need to see anything else. By the way, for information - the loan repayments are £407 per month over 5 years. Which is only about £75 more than I'm already paying with them....

Pixie5740

When I was an engineering contractor paying myself through my own limited company I applied for finance as a self employed person. That meant some lenders would take into account my total income and not just the PAYE portion. Your situation seems a little different in that you also sub-contract out work to other freelancers but if you continue to describe yourself as employed then I think you will find it difficult to obtain a loan using just your PAYE income. In fact your PAYE income is probably below the minimum income threshold set by most high street lenders.

Have you approached the bank/building society where you hold your current account for a loan?