Here’s the deal: Unemployment income is not accepted as the sole source of income by most lenders across the U.S. Your income source must be consistent for the term of the loan.
“This is a difficult topic in general but especially given what’s going on right now,” says RateGenius Credit Consumer Manager Joel Benavides. “Typically under normal circumstances, unemployment benefits last anywhere from 20 to 26 weeks depending on the state, and therefore can be considered irregular to qualify for an average loan term of 60 to 72 months.”
Lenders need to know that you’re able to make payments beyond the expiration of any unemployment benefits. If your loan term is 60 months but your benefits are set to expire in 26 weeks, how will you make payments on your loan after week 27? If you really need to refinance your loan, you can consider adding a cosigner or co-borrower with stable income, depending on your situation.
“Lenders are extremely cautious about taking on new credit risk with brand new consumers, without proof of existing income, to be able to afford the new payment consistently for the term of the loan,” explains RateGenius Vice President of Lender Management Julie Shinn. “When lenders are reviewing credit applications, they’re looking at the ability and stability of the borrower. Bringing on new debt with the high probability of default is something lenders are going to shy away from.”
AppCore suggests asking for a “guaranteed return to work date” letter on company letterhead in situations such as this or consider adding a qualified cosigner to your loan.