Self-employed? Here's how refinancing works for you

The short version

Lenders don't need you to be an employee. They need to be satisfied, under the CCCFA's affordability rules, that the repayment fits your income and outgoings. Payslips are just the easiest evidence of that, and when there are no payslips, bank statements and financials do the same job. The assessment takes a little more reading on the lender's side, which is why the documents you provide matter more, not less.

Why your current loan might not reflect your business anymore

Here's the refinance angle most self-employed people miss: the loan you have was priced on the file you had when you signed. If you took it in your first year of trading (thin history, no financials, income still finding its level), the lender priced that uncertainty in. Two or three years later, with steady statements and a filed set of accounts, you are a different applicant. The loan didn't get worse; your file got better, and the loan never noticed.

That gap is exactly what refinancing exists for. Our guide to when switching makes sense covers the general signals; "I signed this when I'd just gone out on my own" is one of the strongest.

What lenders accept instead of payslips

• Bank statements: usually three months or more. The workhorse document. Lenders read the deposits, the pattern, and the spending. Some accept read-only bank-statement retrieval to speed this up.
• Financial statements. A profit-and-loss for the last financial year, ideally prepared by an accountant, carries real weight, especially for larger balances.
• IR income summaries. Your income as filed with Inland Revenue (an IR3 or a summary of income from myIR) is independent confirmation of what the business actually pays you.
• GST returns, for GST-registered businesses, as supporting evidence of turnover.

Not every lender wants all of these. The rest of the checklist (licence, current loan details) is the same as anyone else's, covered in what you need to refinance a car loan.

How lenders read variable income

An employee's income is a flat line; yours is a wave. Lenders handle that in predictable ways:

• They average. Three-plus months of statements get smoothed into a monthly figure, and that figure is what the affordability test runs on.
• They look at the trend. A wave that's rising reads better than one that's falling, even at the same average.
• They discount the spikes. One extraordinary month (a big one-off job, an asset sale) won't be treated as the new normal.
• They notice what you draw, not just what the business makes. Revenue isn't income. Regular transfers from the business to you, at a consistent level, are what an assessor can actually count.

Keep business and personal accounts clean

The single biggest favour you can do your application costs nothing: run the business through a business account and pay yourself into a personal one. When the two are tangled, an assessor can't tell your income from your turnover or your groceries from your cost of goods, and an assessor who can't tell is an assessor who assumes conservatively. Clean accounts for three months before you apply make your income legible, and legible income is what gets assessed at full value.

Time the application after a strong stretch

Because lenders read your last few months of statements, you get to choose which few months they read. Applying straight after your quiet season means being averaged over your worst quarter. If your work is seasonal, apply after the strong run, not before it. Same business, same year, better file. Likewise, if a filed set of annual accounts is a few weeks away and it's a good year, it may be worth waiting for the document that proves it.

While you wait, run the numbers. The savings calculator shows what a 1% or 2% lower cost does to the rest of your term. It's an illustration, not a quote, but it tells you whether the exercise is worth your time.

Where Leverage fits

Self-employed files vary more than employee files, and so do lenders' appetites for them. The lender that suits a second-year sole trader isn't always the one that suits an established company owner. Refinancing through Leverage puts one application in front of a panel of approved NZ lenders, starting with a soft check that doesn't touch your credit file. If an offer comes back that beats your current loan, you can start the application whenever your statements look their best. If nothing beats it, you keep the loan you have and you've lost nothing finding out.

Leverage Finance is a lead-generation referral service, not a lender. All lending decisions, rates, and terms are determined by the lender assessing your application. Nothing on this page is financial advice. It's general information about how refinancing works.