How to Get a Car Loan on Severance Pay
Losing a job can have significant financial implications, and one of the most devastating results involves the ability to obtain a loan. Lenders generally do not approve loans for borrowers without a steady income. If you receive severance pay, though, you can obtain a loan for a car by following a few key steps.
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Instructions
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Establish a strong credit score. Borrowers who do not have a good credit history can find it difficult to secure an auto loan, and the lender likely applies greater skepticism if a borrower has no work income. While severance pay may meet income requirements, the lender still could deny your loan application if your credit score is too low. You can establish a good credit history and repair a poor credit history by avoiding late payments and by paying off debts.
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Gather documentation showing that you receive severance pay. This documentation must show the beginning and ending date for your severance pay payments and the frequency and amount that you will receive in severance payments.
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Make copies of these documents. You need to keep your original documents. Thus, you want to make copies to provide to the loan officer at the bank or at the dealership. This ensures that nobody misplaces or loses your documentation.
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Save money for a down payment. Most lenders require you to pay at least 10 percent of the purchase price for a vehicle when you apply for a loan. Therefore, you should save some money prior to beginning the loan process.
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Apply for a car loan. You can do this on your own through a financial institution or through a car dealership's financial network.
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Sign the loan paperwork to close the loan.
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Make the down payment to the car salesman and take possession of your new vehicle.
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Tips & Warnings
You can increase your chance of obtaining a loan by finding work. This gives you an additional income source, which could sway a lender to approve your loan application.
The down payment requirement might be higher than usual if you do not have work income.
