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Hedging On Your Taxes May Prevent Loan Approval

Getting a sub-prime auto loan is difficult enough if your FICO falls below 640. It is even more difficult for contractors who do not properly claim all of their income on their year end tax forms.

Sub-prime lenders all require proof of income in order to assess a debt to income ratio for the potential client. Some contractors ”forget” to report all of their monthly income on their tax forms, but claim all of their expenses. This will cause the debt to income ratio to appear out of kilter. If the ratio is too off base, lenders will not loan money, because it will appear as if the borrower is insolvent.

Hedging on your taxes may not be the best idea for people who are self employed. Not because of some moral objection to paying a lower tax bill, but because you may need to prove every dollar to secure the credit you need to grow your business.

About the Author

The author has many years of experience in automotive finance and insurance. However, each consumer's situation is unique. It is best to contact a finance specialist for further assistance.
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