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Purchasing a car is a dream come true for many of us. However, before setting foot in the dealership lot, you must get preapproved for auto financing. But as someone who recently got a new job, is that even an option? Let’s find out!
Can You Get a Car Loan With a New Job?
It is certainly possible to get a loan if you have started a new job. However, it may be a little challenging as potential lenders will review your work history, which plays an integral role in determining whether you are eligible to get an auto loan or not. Simply put, lenders are not only concerned about your current income but your job security too.
Before a lender accepts your loan application, they want to judge whether you will continue to bring in the current income and meet your loan repayment terms. If you lose your job unexpectedly or with little notice, the subsequent loss of income means you may struggle to meet your monthly repayments.
Accordingly, before approving a loan, lenders want to ensure that the borrower has a stable source of income that will enable them to make timely payments and according to the terms.
Length of Employment To Get Auto Loan
As mentioned, one of the critical factors that your car loan approval depends upon is the amount of time you have been working. Lenders typically require applicants to have held their current job for a minimum of six months or longer or have a work history of at least three years. But as someone who just started a new job, you are likely to fall short in this area.
However, the good news is that most lenders will not reject applicants based on a single factor in isolation. Instead, they consider the complete picture. That means it may be possible to transcend this essential criterion and secure a car loan by outperforming in other measurements.
Strengthening Your Application For an Auto Loan
While a new job is a vital factor in the decision-making
Strong Credit History
Your current credit score and credit history are the most crucial determinants of your eligibility to lock down financing with a new job. There is no fixed number as to what your credit score should be to secure an auto loan. Generally speaking, anything between 700-799 falls in the ‘good’ credit range, whereas a score of above 800 is considered excellent. In that case, you can obtain auto financing within a short time of starting a new job, as the exceptional credit history will offset the substandard term of employment.
While lenders will consider the duration you have held your current job regardless of the credit score, they may not be overly concerned about your length of employment if you have a good credit history. In contrast, a bad credit history will compel lenders to emphasize your employment duration before approving your auto loan application.
Low Debt to Income Ratio
The debt-to-income ratio (DTI) represents your monthly debt repayment amount compared to your total monthly income. Auto lenders use the DTI ratio to assess if you can afford a loan payment or not. A good DTI ratio, preferably below 36%, will likely not require you to have a job for a very long time to get a car loan, as your ability to afford the monthly repayments will balance the short employment duration.
If you have a high DTI ratio, consider reviewing your expenses and lowering your debt.
Lenders view a low DTI positively because it indicates that you have the money to make your loan repayments.
Perhaps financing a used car that translates into an affordable DTI ratio will ultimately enhance your chances of getting approved for a loan and at better terms. If you are in the market for an Audi, this dealer advises you to explore their extensive selection of certified pre-owned cars. You may even use their instant trade value tool to find out the worth of your current car if you plan to trade it in.
Large Down Payment
While putting a substantial amount of cash down does not necessarily overshadow your short length of employment or poor credit, it can certainly help with increasing your approval odds. A significant down payment will also reduce your loan term and interest rate, helping you save money in the end.
While there is no set standard for the perfect amount to make a down payment, the larger it is, the better. A sizeable down payment will decrease your borrowing amount, demonstrating that you are a less risky buyer. That can go a long way in convincing the lender to approve your loan despite a short employment length or poor credit.
When it comes to auto loan approval, most lenders generally consider your length of employment and credit score. But depending upon your particular circumstance, getting approved for a car loan may be easier than you would have thought. Even if you do not have the work history required to secure auto loan financing, a robust credit score, low debt to income ratio, and a substantial down payment can increase the odds of getting car financing.