Car loans for unemployed people in Ireland: what lenders ask and what to expect

The question every lender is really asking

Before any bank or finance company lends for a car, it has to be satisfied that you can meet the repayments from your income. When that income is a jobseeker payment, the answer is not automatically no, but the margin for error is thin and the lender will look closely at what else you already pay for.

A car loan in Ireland is usually an ordinary personal loan used for a vehicle. You own the car from the start, and the lender has no hold over it, unlike hire purchase. That is why lenders concentrate on your affordability and credit record rather than on the car itself.

What Bank of Ireland publishes

Bank of Ireland offers car loans from €2,000 to €75,000, repaid weekly or monthly. The term runs from one to five years for petrol and diesel cars and from one to seven years for electric or plug-in hybrid cars, which also carry a lower published rate. Rates are variable, and the bank allows extra repayments without penalty fees.

Online applications are open to existing current account customers with a 365 online user ID. New customers and joint applicants must apply by phone. For any loan of €500 or more, the bank checks the Central Credit Register, so keep your record in good order before you apply.

What Avant Money publishes

Avant Money lends from €5,000 to €75,000 over 12 to 84 months at a fixed rate, so the repayment never changes. It charges no set-up fee and no fee for repaying early. You do not need to be an existing customer, and you can check your eligibility with an online calculator that gives an approval in principle.

The published APR for the smallest loans, €5,000 to €19,999, runs from 8.5 per cent to 19.9 per cent. The rate you receive depends on your financial profile and credit history, so the lowest figure in the table is a best case, not a promise. Applicants must provide proof of income.

Reading an APR range honestly

Where a lender shows a range, assume that a person with a limited income and a thin credit history will be offered a rate towards the upper end, or may be refused. Ask for the personalised rate before you commit, and compare it using the total cost of credit over the full term.

Credit unions are an important comparison. By law they cannot charge more than 12 per cent a year, which is 12.68 per cent APR, and their members often receive a loan interest rebate. Membership and a local common bond apply, and each credit union sets its own limits and conditions.

• Compare APRs only over the same loan term.
• A longer term lowers the monthly payment but raises the total paid.
• Check whether the rate is fixed or variable.

Documents to gather before you apply

Applications move faster, and fail less often, when everything is ready. Lenders typically ask for photo identification, proof of address, your PPS number and proof of income. For benefit recipients, that usually means a recent statement showing your social welfare payment, plus bank statements showing regular receipts and regular outgoings.

If a partner will be a joint applicant, expect to supply their income documents too. Write down every existing commitment, including other loans, credit cards, buy-now-pay-later accounts and rent, because the lender will see most of them anyway.

Two illustrative households

Take a couple in Limerick where one partner works part time and the other receives Jobseeker's Allowance. They apply jointly for a modest used car, offer a deposit from savings, and ask for the shortest term they can manage. The joint income and the deposit give the lender more to work with than a single benefit would.

Now take a single person in Sligo whose only income is a jobseeker payment and who also repays a credit card. A large car loan is unlikely to be approved, and may not be wise even if it were. Borrowing less for an older car, or waiting until work income begins, might be the safer course. Both cases are invented to show how lenders think.

Risks: repeated applications and expensive credit

Applying to many lenders in quick succession can leave a trail on your credit record and rarely changes the answer. Look at why you were refused, ask the lender for the main reason, and correct anything wrong on your credit report before trying again.

Do not turn to a doorstep moneylender or an unlicensed lender to fill the gap. MABS notes that moneylending APRs can reach 187 per cent, and that only lenders licensed by the Central Bank of Ireland should be considered. Missed repayments on a car loan also create arrears, which can limit later borrowing. If your budget is already stretched, call MABS on 0818 07 2000 before borrowing.