How Long do You Need to be Employed to Get a Car Loan?

This question was recently posed to me by a reader. It’s a good one and brings up a few topics. First off, every loan application asks for employment status and history.

I asked the Coors Credit Union lending manager to give a general comment and this is what she said, “There is no minimum to apply. However it is preferred that an applicant has at least 6 months employment history, again preferably at the same employer.”

But, the answer also depends on your situation and your credit score. You probably are aware of how important a good credit score is for qualifying for a loan and for getting a good rate, but employment can subtly affect your loan as well. Generally, lenders like to see consistent employment history of two years, but that doesn’t mean others can’t get a loan.

First-time buyers can get a better rate by waiting until they’ve been at a job for six months. For many first-time buyers the biggest hurdle is credit history. Often they just don’t have much. You can qualify for a better rate and begin to build your credit by finding a co-signer. The loan will be yours. You’ll make the payments and build credit history. However, if you can’t make the payments your co-signer will be liable. If payments aren’t made both of your credit scores will suffer.
Lenders look at numbers to determine risk. The higher the risk the higher your interest rate. Two things determine the risk level:
1) credit score
2) debt-to-income ratio
In some cases, you may be asked to provide proof of income. For example, self-employed people may need to provide documentation of income.
It is not impossible for unemployed people to get a car loan, however, you cannot claim unemployment benefits as income.
One thing to keep in mind when buying your first car, or any car, is that you are not locked into the rate you get. After a year your credit score could improve and if you stay with the same job your employment history will be more secure. At this time you could refinance your loan for a lower rate and possibly drop the co-signer if you have one.
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