Many people receive benefits for a variety of reasons. Maybe you’ve lost your job recently, even if it was through no fault of your own. Or, maybe you got injured or have a disability that prevents you from working.
In these cases, the government can often step in to help you out and make sure your needs are met. In the UK, for example, Jobseeker’s Allowance (JSA) is for those who are unemployed by looking for a job. The allowance allows those individuals to keep money coming in each month.
For the disabled, the government can offer anything from universal credit to an Employment and Support Allowance (ESA).
How can you secure a loan if you don’t have a steady income? Let’s look at some options.
Show a Proof of Residence and Other Bills
One of the best things you can do to secure a car loan is to show proof of income. But, if you don’t currently have a job or you’ve never had a job due to a disability, obviously that can’t happen.
So, you’ll have to prove to a lender the other ways that you are financially responsible and able to make payments on a car loan. One way to do that is to show the lender proof of residence. Whether you make payments on a monthly mortgage or you pay rent each month, showing consistent payments will prove to a lender that if you can pay for a home, you can likely pay for a car, too.
You can also show them utility bills from several months to assure them that you meet your financial obligations each month.
Other Sources of Income
Even if you don’t have a job and you’re receiving benefits, you can use some of those benefits as sources of income to show a lender. Think about where you have money coming in each month.
JSA is a good example. It shows that while you’re not currently employed, you are receiving a steady amount of money each month, and you’re also actively looking for employment that would only serve to continue to bring in income.
Other government benefit programs and different types of allowances can also be shown as proof of income if you’re unemployed. It’s important to be able to prove that you have money coming in each month since that’s how often you’ll typically have to make a payment on a car loan. If a lender sees that you have the money to cover those monthly payments, they will be more likely to work with you when it comes to car finance.
Check Your Credit Score
The great thing about credit scores is that they take more than just your income into account! So, if you don’t have a lot of money coming in each month, you can still have a great credit score, and many lenders put a lot of leverage into that score to determine whether you’ll qualify for a loan.
There are many free places online where you can check your credit score. If your credit score is low and you want to give it a boost before going to meet with a lender, try to get rid of any outstanding debts you have, or work to lower them significantly. You’ll also improve your credit score over time by paying all of your monthly bills on time.
You can see why lenders take credit scores so seriously - they’re a great way to determine financial responsibility. A low credit score typically means a lot of debt or late payments. If a lender thinks you’re in debt and not making an effort to pay it off, they’re less likely to add more onto that pile of debt by honouring a car loan.
Use a Co-Signer
You may be able to use a co-signer if the income you’re bringing in each month isn’t satisfactory to a lender. Getting a car loan on benefits can be easier if you have someone to help you out. A co-signer is someone with a steady income that can vouch for you to a lender. Not only can they help to ensure the lender that you’ll make your monthly payments, but they will be your “backup” if for some reason you cannot.
Use Assistance Programs
Depending on your benefits, you may qualify for certain assistance programs that will help you to get a vehicle. Car finance on benefits can be different than traditional routes but it’s not impossible.
Check out which assistance programs might work for you, or how you can utilize your benefits to obtain financing for a car. There are even certain programs out there that help disabled individuals or those who aren’t able to work by donating vehicles or offering funds for a car.
Unfortunately, being on benefits often requires jumping through a few more hoops or filling out more paperwork through no fault of your own. You might be asking yourself “can I get car finance?”, you absolutely can with a little bit of time and some know-how when it comes to using your benefits wisely and working with the right lender. Don’t be afraid to “shop around” until you find a lender right for you. Be open about the benefits you receive, and do your best to prove to your financial institution that you can afford the loan you’re asking for.