Getting a car loan without a job is tough — here’s how to improve your chances

When applying for any sort of loan, it's important to show that you have a reliable source of income to repay what you borrow — and a car loan is no different.

While it's certainly easier to secure an auto loan when you're employed and have consistent income to show for, it's not totally off the table when you're without a job. Before being on the hook for another monthly debt payment, though, your first step is making sure a car purchase is a smart idea while unemployed. If it helps to secure your next job, it could be worth it.

Aside from full-time employment, you can submit income from part-time employment, self-employment and fixed income sources like Social Security and unemployment benefits. Note, however, that it can be harder to be approved with Social Security, disability benefits and unemployment benefits.

As with any other form of credit, applying with a strong credit score is one of the biggest factors to getting approved for a loan and with favorable interest rates and terms. Of course, the credit score isn't the only one-way ticket to a loan here. However, it can strengthen your application if you're applying without a job, especially if you also have low or no other debts to pay off.

Instantly boost your credit score for free with Experian Boost: Simply connect your bank account to add eligible bills to your Experian credit file and get recognized for your on-time payments — like rent, utilities, cell phone bills, streaming services and even insurance.

The standard down payment on a new car is usually 20% of the purchase price, so, if you're purchasing a $30,000 vehicle, you should put down at least $6,000. For used cars, the typical down payment drops down to 10%, which would mean $3,000 in this example. If you're unemployed, though, putting down more money can help you take away some of your risk as a borrower and improve your odds of getting approved. Also, a higher down payment usually means lower monthly payments.

Getting a cosigner with strong credit and stable income can help you improve your chances of getting approved for your car loan, which is the similar case to other forms of debt. If you default on loan payments, though, your cosigner will need to repay the loan, so it's a big ask to have someone be your cosigner.

CNBC Select ranks CarMax Auto Finance as one of the best lenders for purchasing a used car, which are usually more affordable than new cars. CarMax doesn't charge an origination fee or prepayment penalty, but late fees can vary by state and contract.

iLending works with numerous auto lenders to help you find a loan that's right for you. In order to be matched to a lender in its network, you'll need a minimum income of just $1,500 per month, a 560 credit score and a credit history of at least six months with at least one account.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every car loan article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of car loan products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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