Can I Get a Car Loan When I Am Unemployed?

By Angela Monroe - June 4, 2019

Whether it’s bad luck or bad decision that left you carless and jobless, you can get a car loan even when unemployed.

Qualifying for a Car Loan

When applying for a car loan or any other types of financing, lenders usually require your most recent pay stubs. This is because they want to make sure that you have a stable source of income in order to pay off the loan. However, not having pay stubs and a regular salary does not necessarily mean that you don’t have the capacity to make monthly repayments.

Aside from legal age and Australian citizenship, your eligibility for a car loan will be based on the four C’s of credit: capacity, collateral, credit, and character.


Debt-To-Income Ratio

Since you are unemployed, you need to present other sources of income. These may include pension, alimony and investment earnings. In lieu of pay stubs, you must show copies of tax returns and other supporting documents like dividend income statements.

Based on this information, your lender will determine your debt-to-income ratio. This is the percentage of your income that goes toward monthly debt payments. If you don’t have enough money to cover your proposed loan and existing payment obligations, you will be most likely disapproved for the loan.


If you don’t have other sources of income, your last chance of approval lies in the hands of a co-signer. This person must have an impressive credit score and enough disposable income to qualify. He or she will affix his or her signature on the loan contract alongside yours and will share the same responsibility you have.

Your co-signer will take over the repayments in case you’re unable to. Otherwise, the loan will default and both of your credit scores will plummet.

Down Payment

A car loan usually requires a large down payment. This amount is around 20% or more of the purchase price. Aside from proving your financial capability and your honest intention to repay the loan, the down payment helps reduce your interest rate and monthly repayments.  


The car that you’re going to purchase with the lender’s money often serves as collateral for your loan. This means that while you can drive and keep the vehicle in your position during the loan period, the lender will keep the car’s title. You can only have it, along with the full ownership to the vehicle, once you complete the loan repayments.

If in case you cannot complete the repayments within the agreed loan period, the car will be repossessed. Your lender can also sell the vehicle to recover the loaned money.

According to the Australian Securities and Investments Commissions, your lender can start the repossession process if you are:

  • Behind on your repayments
  • Have received a default notice with a 30-day grace period to settle the overdue amount
  • Have not paid the overdue amount, negotiated a resolution, or requested to postpone repossession within the 30-day notice period

However, your lender cannot repossess the car without a court order and if you only owe less than $10,000 or 25% of your loan, whichever is less. Your lender will also need to secure your written consent before entering your residential premises to get the car. On the other hand, if your car is parked on the street, your vehicle can be towed away without your permission.


You need to have a good credit score to get approved for a prime auto loan, which has a low interest rate and favourable terms. While the “good credit score” may vary from one lender to another, the average is around 700 for a new car and 680 for used vehicles.

If you have a bad credit score, which usually falls around 620 or lower, you can still get a car financing through a subprime auto loan. More popularly known as a bad credit car loan, this type of car finance requires a larger down payment and a substantially higher interest rate than traditional car loans.


Your character is your reputation as a borrower. This will be based on your credit history and financial stability. Based on this information, you will be assessed on how responsible you are as a borrower.

Because the measurement of your character is not quantitative, your unique story and financial situation will be put into consideration. When interviewed for the car loan, remember to highlight your impressive saving habit and money management skills. Also, explain in detail how the car loan can help you and how you intend to pay off the loan.

Get a Car Loan Pre-Approval

To have an idea of where you stand in the car loan application and how much you can borrow, shop around for car loans. Compare the deals from different lenders and choose one with the most favourable loan terms. This way, you won’t be trapped in a car loan that costs you more than you can afford to pay.


Loans For People With Bad Credit specialises in finding car loans for people with less than stellar credit profiles. Fill out our Loan Pre-Approval Form to start the process. One of our bad credit lending managers will call you within 24 hours to discuss your car finance options.

Angela Monroe
Angela Monroe is the Community Manager at The Positive Group, specialising in giving people the information that they need when they need it, and putting you on the path to a fair financial future. She has 8 years of experience in helping Australians find the right finance solutions, and regularly contributes articles to empower Australians with the knowledge they need to become financially healthy.


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