How to Get a Car Loan Without a Job

You may be subject to higher interest rates if you try to get a loan without a job.
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When you apply for auto loans, potential lenders want to see proof of income to verify your ability to make the monthly payments. While being unemployed will make the process more arduous, there are still ways you can show potential financers that you're a good risk.

Show Other Proof of Income

You don't necessarily have to have a traditional job to qualify for a car loan. If you're self-employed, have a trust fund or derive earnings from investments, these can be used as evidence of your ability to repay a loan. Social Security, alimony, a settlement agreement or disability benefits also can be used. Be prepared to show lenders bank or earning statements, profit-and-loss ledgers, tax returns, rental income agreements or any other documentation that will verify your ability to pay off the loan.

Make a Big Down Payment

Lenders want to be reasonably sure that if you default on a car loan, they won't lose serious money. Making a large down payment is a good way to demonstrate your financial viability. For example, if you buy a car that costs $20,000 and make a $10,000 down payment, the lender is assured you have a vested interest in the vehicle. This theoretically makes you less likely to default on your loan, and if you do and the lender repossesses the vehicle, it still comes out ahead financially.

Get a Co-signer

Ask a spouse or relative to co-sign an auto loan for you. Co-signing means the other person makes a commitment to the bank to cover your car payments in the event you can't make them yourself. It's a big favor to ask someone, because if you default, your co-signer has the legal responsibility for your loan. Your interest rate may be higher with a co-signer, depending on the credit score each of you carries.

Potential Downsides

Taking on any type of financial commitment without a steady income is a financial risk. Even if youget approved for an auto loan, failing to make timely payments can negatively impact your credit score and make it harder to get financing again in the near future. You may be better served saving money and paying cash for a vehicle and trading up when you have a more reliable income stream.

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