Under the Patient Protection and Affordable Care Act (PPACA), a seasonal employee is defined as someone who works 120 days a year or less for an employer. Various types of seasonal workers might include restaurant staff members, lifeguards or theme park employees.
If you are a seasonal employee and have bad credit, getting approved for auto financing can be very challenging. In fact, your success will largely depend on your income and the stability of your employment.
Auto Loan Requirements for Seasonal Employees with Bad Credit
Normally, bad credit auto loan applicants are expected to meet minimum income requirements. This is because, while special finance lenders can work with buyers who have credit issues, they need to make sure that these buyers have the means to pay back the loan.
Usually, bad credit lenders require applicants to provide proof that they make at least $1,800 a month (pre-tax). Ideally, this income should come from a regular employer. And the longer the buyer has held the same job, the better their chances will be for approval.
This is why seasonal employment coupled with bad credit can make someone a tough sale for a lender. First, there is the issue of income. Typically, when making an approval decision, special finance lenders will only consider one income source. So, even if someone has two or three seasonal jobs, only the primary one will count.
This means that the car buyer will need to bring in a yearly income from one job that equals at least $21,600 (pre-tax). Of course, this is $1,800 times 12, or what they would earn annually if they met the minimum monthly requirement.
Second, the issue of job stability must be addressed. This is why a seasonal employee who needs a bad credit car loan will need to prove that their employment has been steady. In order to verify that they can count on their income, they'll probably have to provide several years of tax returns. On top of that, they may also need to produce bank statements from these years.
Seasonal Employment and Unemployment Benefits
A lot of seasonal employees rely on income from unemployment benefits for several months out of the year. And while they make think that this income will count toward a minimum income requirement set by a lender, it won't.
Income from unemployment benefits also won't count toward a person's debt to income (DTI) ratio or payment to income (PTI) ratio. So, even if an applicant is able to cover all of the yearly bills and expenses with a combination of wages and unemployment, they may still not qualify for a bad credit car loan. This is because only the earned income will be considered when these ratios are calculated.
Alternative Lending Options for Seasonal Employees
If a seasonal employee with bad credit earns enough income to qualify for a loan, but still has job stability issues, a strong cosigner can help. This cosigner would need to be someone with good credit and a stable, non-seasonal job. Of course, this is an arrangement that should be entered into with caution. After all, a great deal of risk comes with the cosigner role.
Finally, if there is no other option available, a credit-challenged person with seasonal employment may be able to finance a car through a buy-here-pay-here (BHPH) dealership. These types of dealers handle their financing in-house. This means that they don't use third party lenders, and they normally don't run credit checks on buyers.
As long as someone is able to prove that they can make either weekly or bi-weekly payments, they should be able to get approved at a BHPH lot. However, BHPH buyers should be warned that they will probably face a high interest rate on their loan. Also, if possible, they should find a BHPH dealer that reports both loans and payments to the credit bureaus. This way, the buyer will have an opportunity to improve their credit by making all of their payments on time.
Financing Assistance for Tough Credit Situations
Even if you think there's no way you can get auto financing, Auto Credit Express may be able to help. We can match you with a local dealership that can work with unique credit situations. So, even if you think that you have no options, you may be surprised.
To make it even easier, our service is free and comes with no obligations. Therefore, you really have nothing to lose. Go ahead and fill out our simple and secure auto loan request to get started today.