Getting a car loan while on maternity leave may be difficult in some circumstances. Let’s get into the specifics.
Ability to Pay (Income)
First, lenders are going to want to see that you have the ability to repay the loan. This really comes down to income. So, they will want to know if it is paid maternity leave, if you have accrued vacation time to use. Next, a lender will want to know if you are planning on returning to work and how soon after the birth of your child will you be doing so. Still, you may be denied for the loan if your existing payments, including the new loan, are more than 25 percent of your after tax income. This is known as your debt-to-income ratio, and it could be impacted by other loans you’re already repaying (multiple car loans, mortgage, etc). Lastly, lenders will also want to know if there is another income in the household. If your husband works and your own income is insufficient during maternity leave, you may want to consider a joint auto loan, or having your spouse co-sign the loan. This should eliminate most income-related problems.
Down Payment Amount
Down payment will become an issue as well. Lenders may want to see a bit more than you expect. The reasoning is that you are a higher risk because of limited income. That may also force you to pay a higher interest rate. Some lenders may ask for a cosigner until you return to work.
History of Credit
Your credit history will also come into play. If your credit score is excellent, or even as low as 660, you should be able to get the loan you want without too much aggravation. Under 660 and you are going to have to shop your loan around. You may need to start at your local credit union, but online lenders may be your best option.
You may want to consider waiting until you return to work before taking on a new loan, especially if your maternity leave is unpaid. The only reason being that you cannot foresee possible trouble or complications, and bringing on new debt during a time of limited income can be stressful, if not downright risky.
If you are ready for a new loan, we can help you get approved for a car loan a lender or dealer who works with new mothers. Simply go here to submit your credit application online. We have years of experience in the auto finance industry, giving us the experience and network to place your application with the appropriate lender given your income, location, and other factors. Don’t waste your time calling and driving to an array of dealers or banks, when we can get make the lender come to you.