Can Someone Collecting Unemployment Get a Car Loan?
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Many people laid off from their jobs will be allowed to collect unemployment benefits to help them pay bills while looking for new work. However, these unemployment benefits are only temporary. As of January 2011, a person can only collect unemployment benefits for a maximum of 99 weeks. For this reason, benefits are generally not considered a steady source of income. This lack of income can hamper unemployed worker's ability to take out many loans, such as to purchase a car.
Unemployment benefits are considered a stopgap source of income that a person can use to pay basic expenses until he finds a new job. The exact length of time a person can receive unemployment and how much he can receive depends on a number of factors, including how much he made in his previous job and current state and federal laws. However, in all cases, income from these benefits is only temporary and smaller in amount that what he earned under his previous job.
Car loans are loans issued by finance companies to people seeking to purchase cars. Under a typically car loan contract, the finance company purchases a vehicle for an individual, and the individual pays back the company over a period of time. If the individual fails to pay back the loan, the finance company may seize the car as collateral. To receive a car loan, a person must present the finance company with evidence of his ability to successfully pay back the loan.
When considering whether to loan money to an individual and, if so, at what rate to loan it, a finance company will typically consider a number of factors. Foremost among these is the individual's credit history in the form of his credit report, his current income, and his assets. A person with poor credit and smaller, or less secure income, such as a person receiving unemployment benefits, may be charged a higher rate of interest or denied a loan altogether.
Finance Company Policies
Whether a person receiving unemployment benefits qualifies for a car loan will depend on his current financial status and the policies of the finance company to which he's applying. If the applicant has a strong credit history and abundant savings, the company may be willing to issue a loan. However, if the person is less financially secure, the company may decline to issue him a loan, as the unemployment benefits will run out before the loan does, leaving his future ability to pay uncertain.
Michael Wolfe has been writing and editing since 2005, with a background including both business and creative writing. He has worked as a reporter for a community newspaper in New York City and a federal policy newsletter in Washington, D.C. Wolfe holds a B.A. in art history and is a resident of Brooklyn, N.Y.