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Car Financing With a New Job
People with new jobs often have the desire to improve their social conditions. Some plan a vacation a few months in advance, some purchase a house, some enroll themselves in a course, while others plan on purchasing a brand new car.
The majority of people buy a car with the help of a loan. But as a new employee, is this an option? Let’s answer that question.
Can a New Employee Get a Car Loan?
First of all, you don’t necessarily need to be employed to qualify for a car loan. You can always obtain a car loan irrespective of your employment status, or the job title you hold. And there is a long list of circumstances under which you can get a loan.
As you will see in the section below, lenders will check your job title and duration, among other factors, to determine whether or not to lend to you.
What’s the Minimum Employment Time to Get an Auto Loan?
If you have a bad credit history, then lenders will probably look at your employment duration to approve your auto loan application. Depending on the lender, the duration can be a minimum of six months to a year.
Why Your Job History Is Important to Lenders
To understand how lenders decide whether or not to lend money, you need to understand the factors used to determine the eligibility criteria. Some of the major ones are:
Current Status of Your Credit
Your current credit status, along with your credit history, is the most important factor that decides your eligibility. You can either have good credit or bad credit. When you have good credit, lenders will look at the duration you have held your current job. On the other hand, if you have bad credit, they will then focus on the term of your employment even more.
Other Considerations for Lenders
Your line of work
While gauging your auto loan eligibility, the lenders will also look closely at your line of work. This is the particular field you’re involved in. Say, for accounting. If you’ve been an accountant for all your working years, but simply changed employers, lenders will take note of it. They may also ask the reason for switching employers if you had in the past.
Is the income steady and verifiable?
Are you getting paid on a timely basis, and can you prove it by submitting paychecks or payslips? You might have a job, but if you’re getting paid irregularly and there are a lot of deductions, then it may negatively influence your loan approval decision-making process. Some lenders will go as far as to look past the newness of the income source, which they may or may not disclose.
Any other source of income?
If you’re showing extra income above what you’re getting at your current job, then you need to describe the source. This can be from a side hustle or federal benefits like court order payments for child support or an annuity. Depending on the auto loan provider, this income may be considered legit.
While not mandatory, having a cosigner can increase the chances of getting an auto loan, even if you are not employed. Some lenders make it mandatory to have a cosigner while applying for a loan.
Increase Your Chances With a Down Payment
While you cannot control the final outcome, you can certainly increase the chances of getting an auto loan amount with a down payment. A down payment is an amount paid to the lender upfront. Not only does it increase your chances of getting a loan, but it also reduces the interest rate and total loan repayment amount, both of which can save you money in the end.
How a Down Payment Can Influence the Interest Rate and Repayment
Since the down payment is a sum paid upfront, it reduces the principal debt. Let’s say your interest rate was initially 10%, and the loan amount is $50,000. So the interest you incur in the first year is $5,000.
If you make a down payment of $5,000, then the annual interest total will be $4,500. Take note that the 10% remains the same, just that there is a decrease in the amount of money owed, which will reflect the monthly repayments.
Let’s use the same example. In the case of a loan without a down payment, if you opt for the 12-month payback period, then your monthly installment will be around $4,167. With a down payment of $5,000, your monthly amount will stand at approximately $3,750. This will make it relatively easier to pay back.
Benefits of a Down Payment
Some of the benefits of a down payment are already discussed above. Let’s explore the benefits thoroughly in this section. Here is an in-depth guide on down payments you might want to read.
- Lower interest rates: Your interest rates will be lower when you take an auto loan with a down payment.
- Lower monthly installments: There will be a reduction in the monthly bills that you have to cover while paying off the loan.
- Better equity: Equity is the difference between how much the car costs and how much you owe. If the loan amount is more than the car costs, then you’re running on negative equity and vice versa. By depositing a down payment, you bridge the gap and have more equity.
- Manageable debt levels: The higher you make the down payment, the less it will be a burden on you. Thus, it will be much more manageable down the line.
- High chance of auto loan approval: When you make a down payment, lenders will have more confidence that you will pay back the loan. So they will be less hesitant in approving your auto loan application.
How Much of a Down Payment Is Enough?
There is no one standard answer to this question. As a general rule, the more down payment, the better. However, you should take into account your current financial conditions, future planning, interest rate, and lender policies. You can even get a soft credit check auto loan!
5 Best Auto Loans to Help Buy a Car With a New Job
Starting a new job often means new beginnings and sometimes the need for a reliable vehicle to get to work. If you’re in the market for a car and require additional financial assistance, a personal loan can be a practical solution. Depending on your credit history, different lenders may offer varying benefits. Here’s a look at some lenders who could assist you in securing a personal loan for your car purchase.
AmOne (Best for Okay to Good Credit)
AmOne is well-suited for individuals who have okay to good credit and are starting a new job. Their service connects borrowers with multiple lenders, increasing the chances of finding a loan with favorable terms. AmOne’s platform is especially beneficial for those who need a car to commute to their new job but might not have the perfect credit history.
Spring Loans (Best for Bad Credit and No Credit)
Spring Loans caters to those who might be starting their career or have yet to build a strong credit history. Understanding that a car is essential for commuting to a new job, Spring Loans offers options for those with bad or no credit, focusing on broader financial indicators beyond just credit scores. This inclusive approach can help new job starters secure the funds they need for a car purchase.
First Premier Lending (Best for Bad Credit)
First Premier Lending specializes in helping those with bad credit. If you’ve just landed a new job and have a less-than-stellar credit history, First Premier Lending can provide personalized loan solutions. Their approach takes into account your entire financial picture, not just your credit score, offering a chance to secure a loan for that essential vehicle.
Upgrade (Best for Good to Great Credit)
For those with good to excellent credit embarking on a new career phase, Upgrade offers competitive personal loan options for purchasing a car. Known for their straightforward application process and quick funding, Upgrade is an ideal choice for job starters looking for a hassle-free loan experience and favorable terms.
BestEgg (Best for Good Credit)
BestEgg is a great option for individuals with good credit who need a car for their new job. Their efficient approval process and competitive interest rates make them an attractive lender for those in stable financial standing. With BestEgg, borrowers can expect a smooth journey in securing a loan to purchase a vehicle, aligning with their new career endeavors.
- Getting a Car Loan Without Credit History
- How to Remove a Cosigner from a Car Loan
- How to Get an Auto Loan Without an SSN
- Auto Loans For Non U.S. Citizens
- Personal Loans as Auto Loan Down Payments
Purchasing a new car can be fun. However, it does come with responsibilities, the most important being making your monthly payments on time. Making timely payments will be good for your credit history and your ability to apply for more of these types of loans in the future.