Being your own boss in Ontario is rewarding, but it can make financial tasks like getting a loan feel a bit more complicated. If you have a car loan with a high interest rate or a monthly payment that's stretching your budget, refinancing is a smart move. And yes, it's absolutely possible to do when you're self-employed.

What Exactly is Car Refinancing?

Think of it as trading in your old, clunky car loan for a new, better one. You get a new loan from a different (or sometimes the same) lender to pay off your existing car loan. The goal is almost always to get a better deal, which could mean:

• A lower interest rate, saving you money over the life of the loan.
• A lower monthly payment, freeing up cash flow for your business or personal life.
• Changing the loan term (making it shorter to pay off faster or longer to reduce payments).

Why Lenders Look at Self-Employed Applicants Differently

It's not personal; it's about predictability. Lenders love the stability of a T4 employee with a steady paycheque every two weeks. When you're self-employed, your income might be inconsistent-some months are great, others are slower. Lenders just need extra proof that you have a stable and reliable history of earnings to feel confident in your ability to make payments.

The good news is that with the right preparation, you can give them exactly what they need to see.

The Key Documents You'll Need to Get Ready

Being organized is your biggest advantage. Lenders in Ontario will want to see a clear picture of your financial health. Before you apply, gather these documents:

• Notice of Assessment (NOA): This is the most important document. It's what the Canada Revenue Agency (CRA) sends you after you file your taxes. Most lenders will want to see your two most recent NOAs to prove your income over time.
• T1 General Tax Forms: These are your full tax returns that you file each year. They provide the detailed breakdown that supports the summary on your NOA.
• Proof of Business: This could be your Master Business Licence, Articles of Incorporation, or GST/HST number registration. It proves your business is legitimate.
• Bank Statements: Have three to six months of your business and/or personal bank statements ready. This shows your current cash flow and demonstrates that you're making consistent deposits.
• Existing Loan Information: You'll need the details of your current car loan, including the lender's name and the outstanding balance (often called a payout statement).
• Vehicle Details: Know your car's Vehicle Identification Number (VIN), current mileage, and have your ownership/registration handy.

Steps to a Successful Refinance Application

Once your documents are in order, the process is straightforward.

1. Know Your Credit Score: Your credit score is a major factor in determining your interest rate. In Canada, you can check your score for free with services like Borrowell or Credit Karma without it affecting your rating. A score above 660 is generally considered good and will open up more options.
2. Determine Your Car's Value: Lenders won't lend significantly more than what your car is worth. This is called the Loan-to-Value (LTV) ratio. Check your vehicle's approximate market value on a site like Canadian Black Book so you know where you stand.
3. Shop Around: Don't just go to your primary bank. Many lenders, including credit unions and online finance companies, specialize in working with self-employed individuals. They understand how to read your financial documents and are often more flexible.
4. Submit Your Application: With your organized documents, you can confidently apply. Be honest and provide all the information requested. A clean, complete application makes a great first impression.
5. Compare the Offers: Look closely at the interest rate, the term length (number of months), and any potential fees. The lowest monthly payment isn't always the best deal if it extends the loan for years. Choose the offer that best fits your financial goals.

Tips for a Stronger Self-Employed Application

• Keep Business and Personal Finances Separate: If you run everything through a dedicated business account, it makes your income and expenses much easier for a lender to understand.
• Show a Healthy Average Income: Lenders will typically average your income from the last two years of your NOAs. If you had one weak year and one strong one, be prepared to explain it.
• Reduce Other Debts: Paying down credit card balances or lines of credit before you apply can lower your debt-to-income ratio, which makes you a more attractive applicant.

Refinancing your car loan when you're self-employed in Ontario is entirely achievable. It just requires a bit more paperwork and preparation than a traditional employee. By getting organized and presenting a clear financial picture, you put yourself in the driver's seat to secure a better deal and save money.