Sometimes life throws you a chicken and egg scenario. You can’t get a car (or a car loan) without a job and you can’t get a job without a car. Or that’s what it might feel like. However, as with everything in life, nothing is ever black and white. Yes, it may hinder your chances of getting a job but not having a car won’t mean you don’t have any chance. And yes, not having a job will make getting a car loan difficult but it won’t necessarily mean it’s totally out of the question.
If you’re currently unemployed and looking to get a car loan then you do still have some options.
Improve your credit history
First things first. If you want to get a loan, unemployed or not, you need to make it so lenders want to lend you money. This means improving your credit score. There are several ways to do this:
- Make sure you’re registered to vote. By putting your name on the Electoral Register, lenders will be able to find you quickly and verify your details. This is one of the first places they’ll look when checking your personal details.
- Don’t apply for everything at once. Make sure you spread out applications for credit. Every time you apply for a loan, although it doesn’t leave a black mark, it does leave a footprint. If you get rejected a few times in a short space of time, it’s likely to put other lenders off.
- Check that credit reference agencies all have your correct details on file.
- Make sure you keep up repayments for any credit you already have. Missing payments will damage your history but making them will build it back up.
Apply with a co-signer or guarantor
If you have someone close to you who’s employed and willing to help you, you have a better chance. Make sure you check with them first and confirm that they’re happy to do this for you. This will help to reassure lenders that even if you don’t have a steady income at the moment, someone who does is willing to cover your repayments if you can’t.
Get clever with your income streams
Just because you’re not employed, doesn’t mean you don’t have an income stream coming in. There are several forms of viable income that can be counted as an income stream. Rental income, dividends and interest, AirBNB, Family Tax A and B, and Disability support pensions are some to mention. Unfortunately, single parent pension and Newstart Allowance aren’t considered acceptable.
Perhaps you’re a contractor between jobs, or a Freelancer? If you show you’ve got a strong employment record i.e. you’re never out of work for very long, and can back it up with at least two tax returns, most lenders will accept this.
If you’re claiming alternative income streams, you’ll have to provide proof of these. Things like bank statements, tax returns, eBay invoices, or any other proof of transaction.
With a car loan, the car is the collateral for the loan, meaning that if you fall behind in payments, the bank can take it instead. You do need to have a reasonably good credit score and proof that you have the means to make the repayments. In short, the lender must be confident that you’ve got enough disposable income to cover the car payments plus all your other monthly expenses.
There are options out there where lenders use alternative methods of underwriting to help unemployed people qualify for a loan. If you have savings or money in retirement accounts, you could use this to qualify for a loan. These types of loans usually come with a much higher interest so beware. A more relaxed approval process doesn’t come cheap, as there is more risk for the lender.
Article provided by Loans for People with Bad Credit