Having a second source of income can help you get a bad credit auto loan, but only if you meet the minimum income requirement of your lender with one. When you need a bad credit car loan, there are always requirements you need to be aware of. Consumers often ask us about our process, wondering how they can accurately describe their financial situation to a lender.
One common question we receive about income and employment is this one that a consumer recently asked:
"Your request form only allows me to put in one source of income. I work part time and also collect Social Security every month. How can I show this?"
Excellent question!
Income Requirements for Bad Credit Auto Loans
If you're requesting a bad credit auto loan, you're most likely to be working with a subprime lender. These lenders have a number of requirements that you have to meet in order to be considered. One of the most important is whether or not you can comfortably repay the loan.
When you're filling out car loan applications, especially online, it's important that you know what's usually expected of you. Typically, there's only space for one type of income because lenders only count your largest source of income as the minimum qualification. This doesn't mean your additional income doesn't count though; it just counts in a different way.
To this point, many subprime lenders require a minimum monthly pre-tax income of around $1,500 to $2,500 from a single source. If you're getting income from a part-time job and Social Security, you have to list whichever brings in the greatest amount as your primary income.
If both your part-time work and SSI meet the minimum qualification on their own, listing your W-2 income first is ideal. Then, your SSI becomes a secondary income source which may help you to qualify for your auto loan in another way – by impacting your debt to income (DTI) ratio and payment to income (PTI) ratio.
Secondary Income Can Improve Your Approval Chances
Having two sources of income not only helps you have more wiggle room in your budget, it can allow you to qualify for a larger loan amount, or possibly different rates or terms than you otherwise would have. Secondary income can only benefit you if you've already met the minimum income requirement for your lender, though.
The most common forms or secondary income include: part-time employment, claimed tips, Social Security, alimony, child support, or rental insurance. If you have any of these in addition to a source of income that meets the minimum monthly qualification of your lender, make sure to bring proof with you when you sit down to discuss car loan options with a dealer or lender.
Not Enough Income? Consider a BHPH Dealer
If neither of your income sources are up to snuff, however, you're not likely to be considered for the auto loan you need with a subprime lender. But, you're not out of luck. There are dealerships out there that aren't as concerned with where your income comes from, just that it covers your car loan payments. These are called buy here pay here (BHPH) dealers.
BHPH dealerships are both dealers and lenders and offer what is known as in-house financing. This makes getting in and out quickly a bit easier, since they're not waiting on third-party lenders to make decisions. These dealerships are used vehicle lots that aren't as concerned with your source of income, or even your credit score, for that matter.
In fact, many of them don't even check your credit. For these reasons, BHPH lots are popular among borrowers with bad, little, and no credit. Usually, as long as you can prove that you meet the minimum income level, no matter how many jobs you work to get to it, you can get an auto loan done.
You usually also have to be willing to make a down payment, sometimes around 20% of a car's selling price. You can also expect a higher than average interest rate. Consider these the trade-offs for skipping the credit check and employment requirements that are usually expected in subprime or traditional lending.
Turn Income Into a Car Loan
When you're seeking a bad credit auto loan with multiple income sources, make sure that at least one of them meets a lender's minimum income requirement by itself. If you're hoping to gain a car loan approval with combined income sources, you may need to look for alternate options.
Here at Auto Credit Express, we want to assist with that. We've cultivated a large network of special finance dealers that spans the country, and have been matching consumers with them for over 20 years.
If you're ready to take the next step in your auto loan process, start here. Simply fill out our fast, free, and zero-obligation car loan request form, and we'll get to work finding a dealership in your area!
