Folks that find themselves between jobs, work a seasonal gig or receive social security benefits often ask how they can purchase a car without proof of traditional income. This is an important topic because finding a steady job oftentimes requires having reliable transportation. Personal and family obligations like getting kids to school events or driving elderly parents to doctors’ appointments also prove to be difficult without a car. While proof of income will help when applying for a car loan, it isn’t the only determining factor for getting approved. We’ll guide you through buying a car without proof of income by covering when it is required, defining what lenders consider to be income in the first place, and sharing some tips for getting a car without it.
When is Proof of Income Required?
If you plan to take out a car loan to purchase a vehicle, many lenders will require you to have proof of income. Proof of income doesn't always need to be a traditional job, but it should be a steady source of funds that allow you to pay your bills on time. If you have good credit, proof of income will carry less weight than if you have bad credit. You can avoid having to present proof of income completely by buying an inexpensive used car in cash. We recommend targeting a max price of $10,000 for a used car and making a down payment on the car to improve chances of getting approved for a loan.
What do Lenders See as 'Income'?
A traditional job isn't the only source of income considered when lenders are looking at car loan applicants. As long as you're paying your bills on time and have a steady source of funds coming in, you will likely be able to get approved for a loan. Here are some of the common income sources we get questions about:
Classifying seasonal jobs can be tricky when getting approved for a car loan. Typically, if you've worked at a seasonal job for less than six months and it’s not a recurring job, it won’t help your case with most lenders. On the other hand, if you’ve been at the same seasonal job for three or more years and you can prove that you can make payments, lenders will be more likely to work with you.
Unfortunately, unemployment benefits are not typically considered to be a source of income by the majority of lenders. This is because unemployment is not a steady source of income due to its temporary nature. In most states, 26 weeks is the maximum amount of time that one can receive unemployment. This is typically much less time than it takes to pay off a car loan.
Disability and Social Security Benefits
Some lenders will look at your disability or social security benefits as income. Unlike unemployment, these benefits are steady and long-term. Keep in mind that these income sources cannot be garnished which prevents the lender from going after that money if the car loan is not paid off. Due to this risk for the lender, social security benefits as a sole source of income will make it more difficult (though not impossible) to get a loan. If you can prove you've been paying your bills on time for a consistent period of time, this shows the lender that your benefits will be sufficient and that you won't default.
What are the Options?
Not having proof of income can be a challenge but there are ways to get over this hurdle. Improving or maintaining a high credit score, finding a cosigner and making a down payment on the car you want will all work in your favor.
Improve Your Credit
If you have good credit, getting a loan without proof of income will be much easier. It’s important to maintain good credit by making payments on time and being on the lookout for any errors in your credit report. For many lenders, your credit score will be more important than other factors when approving a car loan, including income levels.
Find a Cosigner
If your credit score isn't where it should be quite yet, you may want to enlist a cosigner's help when going to buy a car. With no proof of income, the lender has little reason to have confidence that you'll be able to keep up with payments. Having a cosigner with a better credit score gives the lender more reason to approve you for a loan. If you don't make payments on time, your cosigner will be held responsible to pay instead. For many young adults with no credit history, parents are the ones who cosign, but anyone that is willing to help can take on this responsibility.
Make a Down Payment
Finally, making a down payment will help you buy a car with no proof of income. If you have some money saved up or if you can trade in your current car and put that amount down for the new one, you'll be much more likely to get approved for a loan. Just like the previous two tips, this action shows the lender that you can be trusted to pay back the loan.