When you do not have any cars, it can be tough to get around, especially to your workplace, and when you do not have a job, you may not be able to pay off the car debt. It is a catch-22 situation. If you are wondering whether you can get your car financed when you are unemployed, you are not alone.
Although many of you know the straightaway answer to this question, you cannot have your loan signed off on if you do not have a fixed income, but there are still some options. However, as far as it is about traditional financing options, you cannot get your car financed.
Banks will straightaway turn you down if you do not have a fixed income. Getting a loan from them can be quite difficult even if you receive some of the money as income butt do not have evidence or bank statement to prove.
As far as it is about your friends and family, no one will be able to lend you a big amount of money. Further, it can put a strain on your relationship if you fail to pay them back. Well, you can turn to a few online lenders who can let you borrow money even if you are unemployed. What does that mean?
How can you get car finance during unemployment?
If you want to take out car finance for unemployed, you have some scope to get your application approved. However, it is to note that it does not mean that you can get approval if you do not have any income sources.
Since you do not have a full-time job, your benefits can play a role as a part of your income. The chances of getting a nod are likely to be higher if you have got an offer letter from a company and your employment record between jobs has been good and long.
Until you receive your paycheque, the lender will design the instalment based on your benefits. Similarly, if you are retired and have income from your pension, it will be considered your income. If you have a part-time job or passive income, you can also use that to borrow money.
This will improve the chances of getting approval for the loan. If you want to have your car financed, you must prove to the lender that you have money to pay back the debt. No lender will entertain your application if you do not have any income sources.
What are the other factors responsible for speeding up the processing?
Apart from your income, the lender will take into account your credit score. You must have a good credit score if you do not have a fixed income source. This will likely make your application stronger.
Even if you have got the offer letter, a lender is taking on more risk by approving your application, and this is why they will likely ask you to arrange a more significant down payment for your car. You are generally expected to arrange a 10% deposit size, but you will have to increase the down payment size by 10 to 15%.
This will help a lender mitigate the risk of lending you money when you have no fixed income source. Also, try not to have any outstanding debt at the time of applying for an auto loan because this will altogether remove your chances of getting your loan approved.
Avoid putting in multiple applications because this will affect your credit rating, and as a result, your chances of getting the loan’s approval will automatically go down.
What are finance options available to you?
If you are in dire need of your car and going through a temporary phase of unemployment, you can apply for these funding options:
Joint auto loan
Note that even though you have a good credit rating, there are very minimal chances that any lender will approve your application, but it can come true if you apply for a joint auto loan. The co-applicant can be your spouse or any other family members. However, the co-applicant must have a good credit rating and a fixed source of income. This removes the risk of the lender, and hence the chances for the approval shoot up.
Arrange a guarantor
If you cannot apply for a joint auto debt, you should arrange a guarantor. A guarantor must have a good credit score who will take up the responsibility of paying down the debt if you fail to pay it off. Arranging a guarantor gives a lot of confidence to your lender, and hence the chances for approval go up.
High-interest personal loans
If neither of the options favours your financial condition, you should look for personal loans. These are unsecured loans, and you can use them to fund any of your needs. Unfortunately, since they are not subject to collateral, you will end up paying very high-interest rates. However, note that you will have to put down a larger down payment if you are thinking to fund your car with such loans.
Car finance during unemployment may not be an ideal option even if you have some scope to get the approval for it. Whether you are in dire need of a car or not, your priority is to look for a job.
Even though you have got your job, you should put off your plan of buying a car until you have revived your emergency cushion. In the meantime, you may have been settled down in your job.
Stash away money for your car as much as possible because the higher the down payment, the lower the loan is. As a result, you will be able to save a lot of money in interest.
However, if you are still looking to apply for a car loan, you should consider the alternatives mentioned above.