Car Loans for Unemployed Individuals

So if you're currently looking for work and need car loans for unemployed, you need to first understand the bad credit car loan process and how lenders will look at your income and expenses to qualify you for a car loan. All approved auto sales will be scrutinized.

When it comes to income, it's not just how much you make. Lenders that offer bad credit auto loans also look at what you have left over each month after you pay your bills - something that could be a real issue if you are currently unemployed.

The first thing they do is to calculate your debt to income ratio (DTI). You can also do this. First, add up all your regular monthly bills including mortgage or rent payments, credit card payments, loan payments, average utility payments and anything else (such as alimony or child support) you are required to pay.

Next, you need to divide this amount by your total gross monthly income (your unemployment compensation plus any other income you receive). This will give you your monthly debt percentage. A typical bad credit lender will cap your total monthly debt (including a car and insurance payments) at 50% of your total monthly income.

At the same time, most bad credit lenders don't want you to have a car payment (including insurance) that exceeds 15% of your total monthly income (known as payment-to-income or PTI).

For example, with a gross monthly income of $3,000, a car payment, including insurance, usually can't exceed $450. Since bad credit lenders will assume $100 per month for car insurance, this would leave a budget of $350 or less for a car payment.

Within your car budget you also have to allow for additional costs such as gas and vehicle maintenance.

The bottom line is this: if you are currently looking for a job and you want to qualify for car loans for unemployed individuals, you'll probably need some type of additional income to augment your unemployment compensation.

In addition, in order to qualify for a bad credit car loan, you'll also have to prove that this additional income is ongoing and will last through the entire term of the loan. This income also needs to be sufficient to the point that if you were to lose your unemployment benefits, your debt to income and payment to income ratios with just that income would qualify you for car loans for unemployed.