Individuals with bad credit who receive disability income or SSI income could find that this complicates matters when attempting to qualify for auto loans. This is especially true for car loans for bad credit.
In our experience
If you're sure you have bad credit you may be wondering if you still qualify for a bad credit car loan if all or a portion of your income comes from disability or SSI payments. We know because for over two decades, we've been working with bad credit customers and helping them reestablish their car credit. In fact, we match consumers with dealerships in their area that specialize in customer credit issues.
The alternative – buying a vehicle from a tote the note car dealership – is another option for bad credit customers, but most of these dealers don't report payments to the credit bureaus. In the end, this means that person's car credit is not reestablished and their credit scores will not get better because of this – not to mention the fact that a higher percentage of these loans result in repossession.
But if all or a portion of your income comes from disability or SSI payments, will a bad credit lender other than a buy here pay here dealer even consider your application? It depends.
SSI and Disability Income
It's difficult enough getting approved for a regular car loan if all or some of your income comes from disability or SSI payments and it's even harder if you're trying to get approved for a bad credit auto loan.
Here's why: disability and SSI income, like child support, cannot be garnished. This means that if a borrower with disability income or SSI income has a vehicle repossessed, the lender will be unable to get a court order to garnish that income in order to pay off the loan balance.
In this case, lenders are especially cautious when considering bad credit applicants with either type of income. Even so, there are a few situations where a typical lender might consider this type of income:
• If that person can show additional income sources that can be garnished, such as W-2 wages from a job (the longer the job time and higher the income, the better the chances).
• If the applicant demonstrates long-term residence stability and “situational” as opposed to “habitual” bad credit (current credit problems stem from a single cause, such as a medical issue or job loss versus nothing but bad credit in the past) it will also improve the chances for approval.
When claiming either disability income or SSI income, the lender will require proof. In most cases, you'll need to provide a copy of the original award letter showing the payment amount and duration. You also may be required to contribute other supporting documentation, such as bank statements, to demonstrate that these payments are received on a regular basis.
Where to Look For Car Loans With Disability Income
Borrowers with bad credit receiving disability income often find it difficult to qualify for bad credit auto loans.
We have come across this issue quite a few times in the 24 years we've been in bad credit car sales here at Auto Credit Express. It's also one reason we built our website – so borrowers could understand why this is the case as well as research other topics such as certified used cars and loans during bankruptcy as well as today's subject, qualifying for a problem credit auto loan with disability income.
In order to qualify for a car loan with disability income, you typically need to find financing through a subprime lender. These lenders look at your entire situation, and not just your credit score or income alone to make lending decisions. However, if you're on SSI or disability income you may find it difficult to meet the minimum income requirements for an auto loan.
The requirement is usually a minimum of $1,500 a month in income, as well as proof of that income. So, if you can't meet that with disability income alone, you will have to have some form of supplemental income to add to it in order to qualify for most car loans. Don't forget you also have to meet the lender's additional auto loan requirements as well.
Credit Disability Insurance
For over two decades, we have helped credit-challenged car buyers establish their car credit. During that time, we've helped thousands of buyers at the retail level obtain a bad credit auto loan as well as counseling them on the best way to use a bad credit auto loan (buyers who don't heed the advice sometimes even end up in repossession).
But once approved, there are often other choices that have to be made, not the least of which is deciding whether or not to sign up for credit disability insurance as part of a bad credit car loan.
Also called accident and health insurance, credit disability insurance is set up to provide funds for your car payments if you should become sick or injured and unable to work. This is something that is typically offered to you by the Finance and Insurance manager at a dealership when you're shopping for a car loan.
Depending on the type of policy, the waiting period for benefits begins anywhere from 14 to 90 days from the date your disability begins. Once this time has passed, the policy begins making your car payments. In most cases, but not always, the benefit is retroactive to the first day of disability. In addition, you do not need to be permanently disabled in order to receive benefits.
If you decide to buy credit disability insurance, you usually have to do it at the time you sign up for your car loan. The monthly premiums are based on the amount financed and the type of coverage you choose and the cost is added to the loan and included in your monthly payment.
But, it could help in the event you need help coving your auto loan payments during the course of your loan.
The Bottom Line
SSI and disability income can be a problem with any auto loan, but both can be an even bigger issue if you're hoping to get approved for car loans with bad credit. To give yourself a better chance, be sure to have the proper documentation with you when you visit the dealer for the first time.
At Auto Credit Express, we specialize in placing customers with bad credit with dealers that can help them. Our affiliate dealers are knowledgeable and work with a broad spectrum of lenders to ensure you have the best chance of getting approved for a car loan.
So if you are serious about getting your car credit back on track, you can begin a new chapter in your life by filling out our bad credit car loan request form now.