You’ve been fired, let go, stood down, made redundant, become surplus to requirements or simply got fed up and walked away from your job.
Whatever way it came about, you are currently unemployed. But you have big ideas and want to get yourself a work van so that you can launch the dream self-employed business you dreamed of. Is that going to be possible?
Good news: the answer is yes. Bad news: it’s often a difficult journey. And while regular car drivers can often use public transport until they have a job sorted out, it doesn’t work like that for van owners. You usually need a van to run your business. Carrying out your work or profession is often simply not possible without one.
Finance companies are not charities and, while they are always looking for opportunities to lend money, they also need to know that their clients can afford to make regular repayments every month. But if you can’t show that you have income, lenders will justifiably assume that you won’t be able to make those payments.
Having a regular source of income that isn’t necessarily a job – such as rental on a property – might help you. But you have to show that it is reliable revenue and is declared on your tax return. Plenty of people have unconventional income streams, but the money has to be verifiable.
Odd jobs here and there, or handouts from family or friends, are unlikely to be enough to convince a finance company to lend you money for a vehicle.
The reality is that most loan companies will simply refuse you a loan if you are unemployed, regardless of any mitigating circumstances. Lenders who are prepared to offer you a loan will almost certainly do so on poorer terms than you would be offered if you have a job. That means you might be limited in how much you can borrow, and it almost certainly means you’ll be paying a higher interest rate on the money you’re borrowing.
I’ve always had a job – this is temporary
A very common situation – you can show that you’ve been happily employed for years, and that your future employment prospects are excellent. But you don’t have work right now.
If you have a solid employment history, it will certainly help in getting approval for finance. Some lenders might say ‘yes’, but they will hit you with a higher interest rate and fees, or limit how much they are prepared to offer you.
The finance approval process is all about assessing risk. While there’s no guarantee that having a job today will mean that you won’t be out of work in three months’ time, it’s still a better bet than someone who doesn’t have a job right now and can’t guarantee when they might start one.
It may sound unfair if you’ve had an unblemished employment history up until now, but the finance companies know the odds based on years and years of data, and it inevitably shows that people without jobs are more likely to run into financial trouble than people with jobs.
I have enough money to keep me going for months
Even if you’ve been a diligent saver and ensured you have a decent buffer to keep you going while you search for a new job, the finance company will still consider it a significant risk if you don’t have reliable, regular income.
There’s an old and well-repeated phrase that most people are only a couple of pay cheques from homelessness, and it’s still a pretty accurate situation. The coronavirus pandemic has certainly not helped this at all, and it could take years for the economy, and people’s situations, to recover.
My partner has a well-paid job
This is very common, and may or may not be helpful. Most finance companies won’t allow joint applications for a van loan, but they might consider household income if you are married. If you’re not married, it’s usually not that helpful. That’s not banks making social judgments, it’s just them looking at data that shows married couples tend to have more stable finances than unmarried couples.
It may be that your partner can be a guarantor for your finance application, but this is less common than parents acting as a guarantor for their children’s loans.
Am I too young?
Age will come into it, although it’s not necessarily a deciding factor. If you’re 22 years old and unemployed, you will probably be seen as a higher risk than someone who’s 42 and unemployed because you’re less likely to be able to show a stable employment history and a solid financial position.
When you’re younger, your financial situation tends to be in a greater state of flux than when you’re older and have ‘settled down’. Over the term of the finance agreement (usually three to five years), your financial circumstances are likely to change more drastically than someone already in middle age.
Your income is more likely to increase over that time, but your expenses usually increase significantly as well. Younger people are also more likely to change jobs more often than older people.
Playing the long game
The harsh reality is that not having a job will reduce your options for financing a van. It is possible to find lenders who will provide you with a loan, but the terms are likely to be unfavourable.
Consider your options carefully, and be prepared to lower your expectations considerably. If you are genuinely convinced that you’re only in short-term unemployment, look for short-term solutions: lease a van, share one with a friend or buy a cheap used one that doesn’t need a loan.
It’s not worth plunging yourself into short-term debt just because you want to get into a new van. It’s a tough call, but finding simple, manageable solutions – just until you have income coming in from your new career – can put you in a much stronger position to make a loan application for your dream work vehicle in the future.
