Getting a car loan doesn't have to be a nightmare, even with bad credit.

Car Loans for Unemployed Smackdown!

last updated March 25, 2019

While it may not be easy to get approved for a financing without a job, there are ways of getting car loans for the unemployed. All you need to do is show lenders that you are capable of making the car loan repayments. Having a car while unemployed is essential as you are more guaranteed to get to interviews earlier thus increasing your chances of getting your career moving again.

Car Loans for Unemployed

Can you get a car loan if you’re unemployed?

The answer to this question is yes, but not as easily as you’d like to think. However, if you are unemployed and you wish to get a car loan here are some of the few thing you can do to make it easier:

  • Most lenders will approve you for a car loan while unemployed if you have good credit rating. If your past debt repayments are good then you might be instantly approved for a car loan.
  • Show your lenders that you have an alternative source of income such as pension, disability benefits, social security, child support, interest income and the likes. This shoes that you are capable of paying monthly car installments on time.
  • Most car loan dealers will also verify how long you have been staying at your current place of residence. Ensure that you are not someone who hops from one place to another because lenders will favor borrowers who stay in one place for at least a year.
  • To a lender, a lot of things will determine whether you are capable of paying back the car loan if you’re unemployed. Car loan dealers who offer their services to people who are unemployed and have bad credit assume applicants who pay down payments are less likely to default on loan payments.
  • Consider getting a co-signer to back the car loan being provided if you want to enhance your chances of obtaining an unemployed auto loan approval with no credit score or bad credit score.

Keep in mind that lenders who give car loans to the unemployed often charge higher interest as well as a substantial amount of fees if the applicant’s credit is bad. Therefore, take steps to build your credit score before applying.

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How can I get a car loan with no proof of income?

Freelancers, temporary workers and self-employed people often find it hard to provide proof of income especially when they want to take a loan. If you fall under this category chances are that you may not have pay stubs to verify your income. When getting a car loan this can be a very serious obstacle unless you can pay for the car in full.  However, if you will be in need of a car loan then you should know that most lenders ask for employment verification.

Buying a car without proof of income is a plausible option that can be accomplished through proper preparation as well as lenders who take other financial factors into consideration. Here is how to get a car loan with no proof of income:

1. Provide tax returns

Since you may not have pay stubs, you will have to provide your lender with copies of your tax returns. This is because your tax return s reports all of your taxable income and may serve as an adequate proof if income for your auto loan.

In addition to this, your tax returns for the past two years can provide a reasonable estimate for just how much you will be able make in the current year. This will help persuade your lenders to give you the auto loan since they trust that the information provided on your tax return is correct.

Lenders don’t look at taxable income but gross income so you don’t need to worry if your deductibles make your income to appear lower.  If you are unable to provide tax returns it will make you seem like a higher credit risk.

2. Provide a report of contract and invoices

If you have no proof of income but earn money through freelancing or taking temporary jobs then you would want to provide details about work you have contracted but not invoiced yet.  And if you have invoices, list all the ones you have made for the past year. This information is vital as it provides proof of past income.

Contracts and invoices offer more detail about your source of income. Keep in mind however, that lenders will not only rely on these alone. You should only use contracts and invoices as a supplement to tax returns as well as bank statements.

3. Provide most recent mortgage statement

As mentioned earlier, lenders are more prone give car loans to people who can prove their residence. Therefore, if you own your current home then a mortgage statement can help you proof your residence.  Compile the most recent statement as it will demonstrate that you will reside at the mentioned address.

Remember that the mortgage statement should read your name on it and nobody else’s.  This is because if the mortgage statement is not in your name then the statement will not have your name on it. You can also prove your residence by:

  • Producing utility bills – A good many auto lenders will accept a utility bill as proof of your address provided that it is written in your name. Go prepared with more than one utility bill. For instance, you may also provide water bill, phone bill if you have a land line, electric bill or sewer bill. Just like the other documents, ensure that the utility bills have your name on them. In the event that your bills are in someone else’s name say your roommate or spouse then you will have to provide other forms of business mail in your name at the address of your place of residence.
  • Providing cancelled rent checks – If you rent then a cancelled rent check will be able to help you prove where you live. If you live with relatives and you pay them rent then ask them to sign a statement saying that you live with them at that particular address. Some lenders might ask you to produce mail that such as a bill that was addressed to you at the address you provided.
  • Providing a library card application if you have – Since a library card application requires proof of residence, you can also use it to very that you reside at the address you stated. All in all, pre[pare yourself to bring more documents such as bills or other business mail as proof that you do at the address you provided.
  • Providing other business mail – When we mention other busi9ness mail what we ideally mean is credit statements, other household bills besides utilities or bank statements. Similar to all the other documents, the mail should be addresses to you at your address. Junk mail will not suffice as proof of residence because it is not specifically addressed to you.

4. Put a bigger down payment

Most car buyers on put down about 10% of the car’s value as down payment. However, auto loan lenders will ask you to put down a bigger down payment if you don’t have proof of income. If you are planning on getting a car on loan then ensure that you start saving up way ahead of time so that you have a significant amount for down payment.  If you have an old car consider trading or selling it as this can be applied towards your down payment.

Having a healthy down payment not only helps you to reduce the amount that you have to finance but also reassures your lenders that you won’t delay on your repayment installments. Since lenders don’t want you to be upside down on your loan, they are more prone to give you the auto loan if you give them a large down payment. However, you will be required to provide documentation about the source of your down payment.

5. Consider getting a co-signer

If you can then find someone that will be willing to co-sign your auto loan because this will make your lender more willing to approve it. Remember, a co-signer guarantees that you will make all of your payments on time and in full amount. In addition, the co-signer agrees to pay for you should you default on the loan repayments. In order for one to qualify as your co-signer, they will be required to have an excellent credit score as well as demonstrate stability in their employment and residence and also provide proof of income.

However, ensure that you speak to the person you’re asking top co-sign the loan for you before you start the application process. This will give this other party time to seek advice before committing to help you get a car loan.

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6. Get an auto loan against property

Pledging your property or gold to obtain a car loan is yet another way you can get auto financing. You can use this to purchase a used or new car of your choosing.

7. Get a car loan against a Fixed Deposit (FD) account

If you apply for an auto loan against FD, this means that your lender will treat the loan as an overdraft facility against the deposit sum.  If you have a joint Fixed Deposit account then you are required to get the written consent of the other account holder in order to apply for the auto loan.

8. Consider going for a low-priced car or a used one

We all know that the price of a new car is higher than that of a second-hand car. You will not miss out on a car dealership that sells certified and well-maintained second hand cars. If you opt to buy the car from a private seller just check to make sure that the car is not stolen property or has unpaid debts. You don’t want to end up paying more than you originally should because of such things.

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Can you finance a car without a job?

In this case, you can’t eat your cake and have it too. In order to finance a car you need to at least have a dependable source of income. Usually, if you are able to get a job that reports your income to IRS then that a sufficiently dependable income. However, if you are cobbling up money every month then it will be hard for lenders to give you a car loan. While there are some who will give you the loan anyway, they will charge you a very high interest rate to compensate for the extra risk they will be taking by lending you cash.

If you are still willing to get a car loan without having any way to finance it, ensure that you have a proper plan for making the repayment. However, if this is too risky for you then consider saving up enough to buy the car in full. While it may be a slow option, it can equally be an incredibly powerful and disciplined way to use your cash. It is also a good practice to build your money management skills. However, if you know how you will finance your car loan repayments without struggling and straining to hard then go for it, there are many lenders out there waiting to give you a car loan.

Car loan between jobs

There are those companies or businesses that often hire employees for a fixed term or as casual. This not only enables them to control their employment costs but also make it a bit tricky for you who might want to get an auto loan in future or any loan for that matter. You are more at risk if are in and out of work as the demand for your skill set changes.

If you are in between jobs right now and you want to take an auto loan, having a strong history of continuous employment will make it more likely to be approved for the loan. Getting a car loan in these situations however hard, is quite possible. You can make your application by doing the following:

  • Supplying your lenders with personal references that have authority to speak about your past employment
  • Providing previous years tax returns that show your annual income
  • Showing proof that you have a stable residential as well as loan repayment history
  • Offering lenders a letter from your employer confirming their intentions in regards to your employment

Remember that the lending market continues to become very competitive as more online lenders offer alternatives to big financial institutions such as banks. What this means is that you are now more likely to get lenders that accommodate people with alternative employment profiles and know that they are capable pf affording to repay a loan.

If you are unsure about where to get such lenders, try and seek advice from a trusted car dealership or broker. This is because brokers are usually up-to-date with the latest loan offers and changes to any lender policies. Therefore, if there is a car loan that you are eligible for they will definitely point you to the right direction or keep you in the loop every time something comes up.

One advantage of using a broker is that you will get to protect your credit rating as 5they will make sure that you do not submit any car loan application that doesn’t meet the required criteria.  By doing this, you are ensuring that when you do get meet the criteria, your credit enquiries will not be a barrier to the approval of your car loan.

Benefits that auto loans offer the unemployed

Here are some of the benefits offered by auto loans for the unemployed:

  • Affordable monthly installments
  • Offers financing despite you having bad credit
  • Competitive rates of interest
  • May require less documentation
  • The process is simple, easy and hassle free
  • You can get approval within only a few hours
  • Get vital cash to buy the car of your choice

How to get the right car loan lender

1. Seek out local credit unions and banks

If you are a member of a credit union, you should check them out before you even considering any other lender for your auto loan. Keep in mind that credit unions are both community and member-oriented. For this reason, they will most likely offer competitive interest rates and a user friendly loan process.

If you already have a relationship with your local bank of the other hand, visit a branch and talk to someone about your car loan in person. The bank will have all the details of your financial history since they already do business with you thus making them more willing to work with you.

2. Avoid lenders who are predatory

Lenders who are predatory offer use fraudulent and unfair practices. Such loans prove to be attractive especially if you cannot provide proof of income since they are easy to get. Keep in mind that these loans come with very high interest rates as well as expensive charges and fees. While it is also not always easy to spot a predatory lender, here are some of the things you can be on the lookout for:

  • Advertising that promises to give you a car loan even if your credit score is bad. Such loans often come with extremely high interest rates.
  • Add-on packages that come with the loan such as theft deterrents, rust-proofing or even insurance. Such packages only inflate the loan amount instead of adding value to your purchase.
  • Lenders that encourage you to put false information on the loan. Such loans tend to be predatory.

3. Be careful of dealer financing

Be wary of dealers that try to convince you that you don’t qualify for a bank loan because you don’t have enough proof of income. Do not fall for this nonsense especially if you haven’t approached your bank in the first place. Such dealers may be trying to mislead you so that they can get you working with their financing. Unfortunately, dealer financing comes with higher interest rates most of the time meaning you will have to part with a bigger monthly installment.

Similarly, they also stretch the loan out for 72 months or more in order to make the monthly payment lower. In this case you could still be paying off the loan even after you no longer own the motor vehicle.

4. Do a thorough examination of all financing paperwork given to you by the lender

In the event that you opt for dealer financing, ensure that you don’t leave the dealership without a signed contract. There are those dealers that will allow you to take ownership of the car even before completing the loan process only for you to get a call a few weeks later with the news that your loan application didn’t go through because you didn’t qualify.  Such lenders will then persuade you to accept a different loan with a higher interest rate.

Don’t fall for such lenders because this is a scam. Remember that a dealer can adequately assess the worthiness of your credit thus approving you for a loan there and then. Also if the lender is not willing to complete the loan process with you being present just go elsewhere.

Why repairing your bad credit is essential when looking for a car loan

Honest lenders evaluate your credit score before approving your car loan. Therefore, if you don’t have proof of income take some time to prepare so as to be credit worthy. The following will help you repair your credit score and also increase the likelihood of you +

  • Getting a secured credit card
  • Paying all your bills on time
  • Opening a store credit card
  • Creating a budget and working out a repayment plan to all your creditors
  • Paying off as much debt as possible
  • Disputing negative or inaccurate information on your credit report
  • Avoiding subprime loans

Conclusion

Getting a car loan while unemployed is possible provided you have a solid plan of repaying your lenders. Just make sure you are smart about going about, do research and seek advice from trusted parties.

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