For many drivers who are unemployed, in receipt of benefits or are retired, getting a car may seem impossible. But for many, it can also be a lifeline. Whether you’re looking for a job and need a vehicle to get to interviews or you are retired and need it to do the things you’ve always wanted to, securing car finance could be at the top of your priority list. More people than ever are choosing finance as a way to spread the cost of owning a car, especially when new and used car prices are at an all-time high. The guide below looks at the different factors that you could consider before applying for a car loan to help improve your chances.
Can you get a car when you’re unemployed?
It can be possible to get a car when you don’t currently have a job, but it can make it harder when you have no steady income. Lenders want to know how much you can comfortably afford to put towards your finance deal and how you’re going to meet the repayments each month. To verify this, lenders usually ask you to provide 3 months’ worth of bank statements or payslips and when you don’t have a job, this can be tricky. If you’re in a position if you’re in receipt of benefits or you’re looking for retired car finance, you will usually have a steady income each month and would be able to prove your affordability. This can help you to get approved but if you have no income at all, you will be declined car finance on the basis that you simply can’t afford it.
Ways to increase your chances of getting a car when you’re unemployed:
Whilst car finance can never be guaranteed to anyone, there are a few factors you can consider before you start applying that could help you to get approved.
1. Have a good credit score.
Credit scores are really important when it comes to getting a car on finance. Lenders use a credit check to see how you’ve handled credit in the past and based on your previous behaviour, how likely you are to handle future loans. A good credit score is preferred by lenders as it usually means you have a long history of making payments on time and in full, have low levels of debt and use your credit wisely. If you’re credit score is low, you could consider increasing your score in the run up to your application to help get you accepted and also lower your interest rate.
2. Prove your affordability
As mentioned above, lenders want to know how you’re going to pay back your finance and with what money. If you are in receipt of benefits or receive a state pension, you could use this as evidence of affordability as it will usually be a regular income each month. You can prove your affordability by supplying bank statements and a breakdown of the benefit income or pension you receive. If you don’t have a job, it can be better to wait until you find a secure position as it can increase the likelihood of approval.
3. Save for a deposit
It can be hard to save for a deposit for car finance when you’re currently unemployed and you may already be replying onsavings to get you by. However, having a deposit to put forward at the start of your agreement can be really beneficial and favoured by finance lenders. Putting more down at the start of your agreement means that you don’t have to borrow as much from the lender and reduces your loan amount. A smaller loan can then be more manageable, and you could also benefit from lower monthly payments too.
4. Get a guarantor to support you
A guarantor car loan is when someone else agrees to pay your loan if you fail to do so. A guarantor can be a friend or family member who is willing to pay your monthly payment if you miss the deadline. If you’ve had trouble in the past sticking to your financial commitments, it can be hard to get someone to trust in you, but guarantors are favoured by lenders. From a lenders point of view, they are essentially getting two chances for the loan to be paid back.
5. Find a specialist lender
If you’ve tried to apply for finance when you’re unemployed and have been declined, it may be because you are applying with the wrong lenders. Mainstream or prime lenders typically work with those who have good credit as they are less of a risk to lend to. It can be worth finding a lender who specialises in your situation or by using a car finance broker. A car finance broker usually has access to multiple trusted lenders and work on your behalf to find the best finance package with the lowest rate from reputable finance companies.
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