Does employment status affect car finance?

Unfortunately, people in the UK lose their jobs every day! It can be upsetting and unexpected and leave you wondering what your options are. For some people they will need a car to get to work but don’t currently have an employment status to be able to get a car loan and this can be disheartening. However, you may still have options available to you. The guide below explains how getting a car on finance when unemployed is possible and how different employment status can affect your approval rate.

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Why is employment status considered for car finance?

There are a number of checks that car finance lenders put in place to abide by responsible lending practices and to protect all parties involved. One of these checks can be done by asking applicants about their employment status and their annual income. From a lenders point of view, they want to know how you will pay back your car loan and with what money. Car finance is a legally binding agreement where you agree to make all your payments on time and in full till the end of the term. People who are in full time employment and have a good income are usually the most favourable. Lenders will want to know how long you have worked for your employer and how much you earn to determine whether you will pay back your loan or not.

Do car finance companies contact your employer?

Many car finance lenders don’t contact your employer to check your employment status. However, some lenders could choose to do so. Regardless of your lender contacting your employer or not, you will be required to produce bank statements or pay slips to prove your income and affordability.

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

Car finance lenders want the assurance that you can be trusted to pay back your car finance on time and in full. If you don’t currently have a job, it can be hard to prove how you will meet your repayments. Car loans for people on benefits can be possible but you may face higher repayments or have less acceptances. However, there can be some ways in which you can help to increase your chances of approval.

Ways to improve your chances of getting car finance with no job:

Improve your credit score

Another check that many lenders may perform is a credit check. A credit check helps lenders to see what type of borrower you have been in the past and your ability to handle credit. The best car finance rates are usually offered to people with good credit scores as they usually have a strong history of making repayments. If your score is a little on the low side, you could consider increasing your credit score before you start applying for car loans. This can make it easier to get accepted and get you a better deal.

Save up for a deposit

Having a deposit to put down for car finance can help to reduce the amount you borrow from the lender and make your loan easier to pay back. By taking out a smaller loan, you can reduce your monthly payments and pay back your finance agreement faster. If you don’t have a job, it can be hard to save for a deposit but even a few hundred pounds to put forward can help. It’s also worth bearing in mind that even though you can get an auto loan with 0 deposit, some agreements require a deposit contribution.

Get a part time job

If you’re currently unemployed, you could even consider getting a part time job to help show you have a consistent income. This could be a good idea for students who are looking to get car finance and want to drive to university lectures.

Prove where you live

It can make it easier for you to get approved if you can prove where you live. Lenders tend to favour people who don’t move around ad much. This can be hard for people who have no fixed amount such as military personnel but military car finance can be possible too! You could consider registering on the UK electoral roll which lenders use to verify your living address and that you are who you say you are.

Explores types of car finance

When you have no employment status, it can be harder to get accepted with banks and building societies for personal loans. However, you may have more chance of getting a car loan if you opt for a more suitable finance agreement. Hire purchase car finance can be suitable for people with low credit scores or adverse employment. This is because the lender owns the car throughout the agreement so if you fail to pay, the lender has the right to take the vehicle off you.