Length Of Employment
Usually, lenders want to see at least six months of continuity with a current employer. Some lenders prefer one year.
Besides these details, you’ll also probably need to provide a total work history of at least three years and ideally there shouldn’t be a gap of more than 30 days between job changes.
To be clear, none of these requirements are set in stone.
The stronger employment history you have, the easier it is to receive approval with a bad credit score. When you don't have the consistent work history that a lender desires, the odds of car loan approval grow slimmer.
If you have the history, and the lender feels that you’ve been jumping jobs or are employed for shorter stretches of time, the likelihood of approval also falls.
Stability
When lenders check your employment history, they also verify your stability with employers.
If you exhibit a limited work history, but you’ve been stable, it is easier to get approved. Ideally, most lenders accept a gap of 60 to 90 days between job changes.
However, there are certain lenders which don’t accept gaps above 30 days. That said, to get approved, you need to be employed with your current employer for a minimum of six months.
Lenders like to verify if you have a steady income.
They will request pay stubs and other income proofs to ensure you earn enough to repay any loan. When your employment history is full of gaps, it indicates an unsteady income, thereby increasing the chances of a rejection.
If you’ve experienced a lot of job changes and gaps, be prepared to provide substantial reasons.
Consistency
Other than the income and the stability of your job, lenders will also check the consistency of your income.
They will verify if you’re getting paid regularly and if there’s many deductions on your take-home salary using bank statements and salary receipts or pay stubs.
In conjunction with these activities, lenders will also validate the consistency of your line of work or profession.
If you have a long work history, but you haven’t been consistent with the industry, it can shed a bad light on your record. For instance, if you started as an accountant, then switched professions to marketing, and finally chose design, it might impact approval likelihood.
This kind of unscripted changes in career can create hurdles when seeking approval.
Contrarily, if you’ve been an accountant throughout your career, but just changed jobs within the same industry, lenders will probably approve your application.
What If Your Employment Is Not Conventional?
Getting an auto loan without conventional proof of employment is equally tough.
When you depend on alternate sources of income and can provide substantial proof of the same, you might get approved based on the following:
- Even if you don’t have a job, but are earning money through other sources like rent, dividends, alimony, pension, or social security among others, you can add these to your proof of income.
- If you’re working multiple jobs, you can provide the details for all of them, but the lender will only consider the one with the highest income.
- If you’re a seasonal contractor, you can provide additional documents like a bank statement or a tax returns statement, ideally for a minimum of three years.
- If you work for cash only, you might be asked to provide notarized letters validating your employment and income.
Conclusion
When your credit score isn’t up to the mark, it is difficult to get approved for a car loan.
Still, if you meet the additional criteria of employment and income, you’ll find financing – albeit at a possibly higher rate.
Make sure that you understand the requirements, speak with the lender, and that you’re employed for at least 6 months before you apply for an auto loan.
