Unemployment payments are temporary. Some lenders won't consider extending a loan to someone with a temporary income, although other lenders might, depending on your credit score. Low unemployment wages tend to result in high debt-to-income ratios -- particularly for those used to substantial incomes -- which are also used to determine a loan approval.
Income
Your lender might accept other forms of income from rental properties, child support, disability, social security or a pension. If you earn additional income, find proof of income statements to provide to your lender for your application. Some lenders don't accept bank statements to prove income, while others do. You'll have to search for a lender that can assist you based on your circumstances. If you're nearing an unemployment extension period, wait until after you're approved for your extension. Otherwise, the lender may assume your unemployment period is nearing its expiration.
Finding a Lender
Compare lender interest rate offers as you normally would. Once you narrow your loan options to several providers, call the lender's loan departments to inquire about income requirements. You may find a lender who accepts unemployment wages as income. Otherwise, consider using a dealership for financing. Many dealerships work with numerous lenders, so it may know of one that can approve a loan for someone in your circumstances. Consider using a buy-here, pay-here lot, which may charge higher interest rates but is also more lenient with income and credit issues.
Loan Restrictions
You might end up with a restricted loan because of the amount of your unemployment wages. If you have a poor debt-to-income ratio, you might find a lender to approve you but only for a certain monthly payment. For example, if you apply for a $20,000 loan, the lender may approve you for only $12,000, which may result in a large down payment. Or you might have to choose a different car, even with good credit. Based on other debts listed in your credit report, the lender may determine that you can afford a car payment of only $120 or less, restricting the cars you can finance.
Co-Signers
To avoid a restrictive loan or a large down payment, apply for a car loan with a co-signer. A co-signer's credit history, score and income secure your auto loan. If you have excellent credit, a lender might allow a fair-credit co-signer for income purposes only. With poor credit, your co-signer should have good to excellent credit and debt-to-income ratio. If you default on your auto loan, the co-signer's credit suffers, which means you might find it hard to find a willing co-signer. Ask close friends or family members to help.
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