Can I get car finance if I'm unemployed?
If you find yourself unemployed and in need of a car, you might be wondering, "Can you get car finance without a job?". It’s a fair question, and one we get asked a lot here at Car Finance 247. We’re also commonly asked what happens if you lose your job when you already have car finance to pay for? These can both be worrying situations, but stick with us while we explore the possibilities and address some common concerns.
Do you need income for car finance?
Yes, some form of income is typically needed by lenders when you apply for car finance, as it helps them make sure you are able to make the regular repayments. A steady income shows you have financial stability and reduces the risk of you missing payments (defaulting) on the loan. Lenders use your income to determine the loan amount you qualify for, and to evaluate your affordability based on the level of debt compared to your level of income.
Additionally, checking your income is essential to prevent fraud and ensure you have the means to repay the loan. While income is a significant factor for lenders in whether they will consider you for a car finance loan, other factors like credit history, employment stability, and down payment amount also play a role.
If you're unemployed or have irregular income, securing car finance may be more challenging, but alternative options such as finding a co-signer or offering collateral can help overcome this hurdle. It’s also important to remember that ‘income’ doesn’t always have to take the form of a traditional 9 to 5 full time job; there are lots of forms of income that might be considered acceptable to certain lenders, so don’t lose hope.
Can I get a car on finance if I’m unemployed?
While it's more challenging to secure car finance without a job, it's not impossible. All lenders require proof of some form of income, but as we’ve already mentioned, this doesn’t always have to come from a traditional form of employment. Some lenders offer car finance options tailored to people in unconventional employment situations, such as freelancers or temporary workers. And some lenders even specialise in car finance for bad credit, or people whose only source of income is a pension or benefits.
How can I get finance without a job?
There are some steps you can take to get car finance without a job, it just takes a little research and patience to find the right lender or the right type of car finance loan to suit your situation. Here’s what you can do to get the ball rolling:
1. Explore alternative lenders: As we mentioned previously, there are specialist lenders out there who may be able to help you secure car finance without a job. Start researching lenders who specialise in financing options for people with non-traditional income sources or those who are currently unemployed. Reach out to each of them, explain your situation honestly and compare their offers to find the right one to suit your circumstances.
2. Provide additional security: Sometimes you can give lenders more reassurance that you are able to repay the loan by providing a valuable asset as ‘collateral’ for the loan. Property and houses are commonly used as collateral for loans, or offering a large down payment (deposit), can also improve your chances of approval.
3. Consider a co-signer: Having a co-signer with a steady income can strengthen your application and reassure the lender of your repayment ability. This option is often called a guarantor loan, and means that there is somebody there with steady income and a good credit score who would be responsible for repaying the loan if you aren’t able to.
4. Improve your credit score: A higher credit score demonstrates financial responsibility and may compensate for the lack of steady income. Credit agencies like Experian and Equifax can provide you with tailored tips and advice for improving your credit score (usually for a small fee) if you’re not sure how to do this.
What happens with car finance if you lose your job?
It’s one thing searching for car finance without a job, but losing your job when you’ve already got financial commitments like car finance can also be very worrying. If this happens, it's important to address the situation straight away to avoid defaulting on your loan, as this could damage your credit score and prevent you from getting approved for other types of credit in the future. Here's what you can do about your car finance if you lost your job:
1. Review your contract: Check your loan agreement for any clauses related to unemployment, financial hardship or general difficulty repaying the loan. There may be conditions set out in the contract that make allowances for this which could help you.
2. Contact your lender: Inform your lender about your change in employment status immediately. They may offer options such as payment deferral or restructuring to help you make sure you don’t miss any payments, and remove any undue stress for you.
3. Explore assistance programs: Some lenders provide assistance programs for borrowers facing financial difficulties. You can ask them about any available options so you can explore all avenues.
How to handle your car loan if you lose your job
Though it’s not easy, it’s important to stay calm, and follow these basic steps to make sure your car loan is taken care of while you find new employment.
1. Assess your financial situation: This is a good time to take stock of your finances and create a budget to manage your expenses effectively during this period. This can help bring a sense of clarity to what is naturally a stressful situation.
2. Seek temporary income sources: Consider temporary employment or freelance opportunities to generate income while searching for a new job. You may also be able to apply for Universal Credit or other types of job-seekers benefits while you’re unemployed and searching for work.
3. Communicate with your lender: As soon as you know your employment is about to be lost, you should get straight in touch with your car finance lender to let them know about the situation. Maintaining open communication with your lender and giving them honest information about your income is essential, and they may be able to help you with temporary repayment holidays or a more manageable repayment schedule until you find new work.
4. Explore government support: It’s well worth doing some research to see if there are any government programs or benefits that may provide temporary relief or assistance with loan repayments.
5. Consider refinancing: If possible, explore the option of refinancing your car loan, as this can help reduce monthly payment amounts and interest rates to make the loan more manageable with your current financial situation.
So while securing car finance without a job presents challenges, it's not impossible. By exploring alternative lenders, understanding your options, and maintaining open communication with your lender, you can increase your chances of obtaining the car finance you need, even during periods of unemployment.
And if you find yourself suddenly being made redundant or losing your job, it’s good to know there is help available to keep your loan repayments manageable and prevent any damage to your credit score while you get back on your feet. Open communication with your lender is the key to navigating this situation