Unemployment in the US was around 4.7 percent in May 2016. Many people looking for steady work struggle to find or maintain employment because they don't have reliable transportation. If you're in this situation, you may be wondering if it's possible to qualify for auto financing so you can get a dependable vehicle to help you find a job. Yes, you can get approved for a loan. Here's what you have to do.
Demonstrate Ability to Pay
A lender's primary concern is whether or not you will make the payments as agreed. They prefer applicants who have a steady source of income because this minimizes the risk of loan defaults. While a job is the most common source of income, it's not the only one. So, even if you are unemployed, you can still get approved for an auto loan if you can show you're receiving adequate income from other sources.
For instance, if you're collecting unemployment, you can use that to qualify for the loan. Other acceptable income streams include:
- Social Security payments
- Disability payments
- Rental income from real estate
- Income from investments (e.g. dividends)
You might also be approved if you can show you have an adequate amount of money in savings. For instance, if you have $10,000 in a savings account and the vehicle you want to purchase is $12,000, the lender may approve the loan since you have most of the money on hand to make the monthly payments.
Have Good Credit
You may also qualify for an auto loan without employment if you have good credit. As noted previously, lenders are concerned about your ability to pay for the vehicle. However, some lenders may overlook your unemployment status if your credit is good enough. In the lender's eyes, an excellent credit score is proof you pay your bills on time, so the company may be willing to take a gamble on you.
Be aware, though, the lender may require you to put a large down payment on the vehicle. For example, the bank may ask people with jobs and good credit to put 10 percent towards the purchase price of the vehicle. Since you don't have a job, however, the bank may ask you to put down 20 percent or more depending on your credit score. The lender wants to keep its losses to a minimum, so be prepared to pay more upfront for the vehicle you want to buy.
Get a Cosigner
If your credit is not great and/or you don't have any alternative sources of income, the lender may require you to have someone who is employed cosign the loan with you. This alleviates some of the company's risk in loaning you the money. If you default on the loan, the bank can go after the cosigner for the balance due on the account.
The cosigner will also have to meet the lender's minimum standards for the loan. You may not be approved for the auto loan even with a cosigner if the individual has terrible credit or doesn't make enough money each month to cover the car loan, for instance. Therefore, you need to be careful about who you take with you to the dealership. The better the person's credit and income, the higher your chances are of getting the loan.
It's important to note that, without employment, you may not qualify for the best interest rate. Thus, you need to be prepared to pay more for the money than you normally would if you had a steady job. For more information about qualifying for an auto loan while unemployed, contact a local dealership such as Western Avenue Nissan.Share