The short answer is yes. It is possible to get a car loan while you are unemployed, but there are conditions. Most lenders mainly look at your past payment history, credit score, and the current status of your payments. You may be eligible for two types of car loans as long as you have a source of income.
Secured by Savings Account
The first type of loan is one that is 100 percent secured by your savings account. Often referred to as a secured loan, you will need to place the price of the vehicle, all fees, and total interest into a savings account. The lender will then place a lien on that account. You will not be able to withdraw money from, nor close that account without the approval of the lender holding the lien. If you default, the account will be foreclosed on to recover the amount due on the loan. If this happens, the vehicle will generally remain your property, but your credit score will be wrecked fro up to seven years.
Secured by Vehicle
The second type of loan could be a more traditional loan that is simply secured by the vehicle you purchase. Your loan will still be subject to an acceptable down payment and regular loan terms. One effect of your unemployment may be a higher interest rate. You may face an additional five to eight interest points because of your quasi-unreliable source of income.
The Right Choice?
Despite the availability of a car loan while on unemployment, you may to need consider whether it’s the right option. What happens if your unemployment benefits are adjusted to a lower figure or run out altogether? Taking on debt at any time is a risk, but while you are unemployed it may not be a sensible thing to do. Why not wait until you have returned to work, or alternatively, save for a few months to purchase a cheap used vehicle with cash.
If you have determined that it is essential at the moment, you can apply here for your auto loan.