Under the right circumstances, borrowers with less than perfect credit can get approved for a car loan with a part time job. When you need to finance a vehicle and your credit is damaged, your income becomes much more important to the car-buying process.
It's okay if you have multiple jobs, or your main job is part-time, but there are certain income requirements that you must meet in order to get approved for auto financing.
Bad Credit Auto Loans and Part-Time Wages
Here at Auto Credit Express, we've spent more than the past two decades helping car buyers with bad credit locate dealers who are able to help them obtain financing for a new or used car.
During that time, we've answered thousands of questions from applicants, many of them having to do with the income requirements for a subprime car loan. One income question we frequently get asked is, "Can I get approved for a car loan if I have a part-time job and my credit is lousy?"
Buying a Car With a Part-Time Job
The answer to that question is that, under the right circumstances, an applicant with poor credit and a part-time job can qualify for a car loan. In these situations, subprime lenders are looking for qualifying income, not the hours it takes to generate that income.
In other words, as long as the income from the part-time job is at or above the lender's minimum income requirements, they will consider the loan application. So, if a lender's minimum monthly income requirement is $1,500, the loan application will be considered as long as the applicant's income from the part-time job is $1,500 or more.
Lenders look at one job for the minimum income requirement but may consider a second job to determine your DTI and PTI ratios. If you don’t make enough money with one job, only a spouse co-borrower can help. If you don’t have at least a three-year job history with no major gaps, a cosigner might be the answer. On the other hand, if your part-time job is mostly tip-based, you could be in trouble if you don’t accurately report your income and include tips because this can throw off your DTI ratios.
Adding a co-borrower or putting more money down doesn’t guarantee that you can get approved with these income issues. Finally, if possible, try to get pre-approved for a loan from your bank or credit union before you head to a dealership. With a solid payment history, you may be surprised by what they can qualify you for.
How Car Loan Approvals Work with a Part-Time Job
Bad credit auto loans are offered by subprime lenders. Because these lenders specialize in providing financing to credit-challenged buyers, they look at factors outside of credit scores, which include income and employment stability. Although requirements vary by lender, they typically require these three things:
- Minimum income amount – Generally, subprime lenders like to see you make $1,500 to $2,500 a month, pre-tax, from one job. You can provide proof of income by bringing in a recent pay stub showing your year-to-date income, or two to three years of recent tax returns if you’re self-employed.
- Debt to income limit – Lenders typically like to see a debt to income (DTI) ratio of no more than 45% to 50%. You can calculate your DTI by dividing your monthly bills, including your estimated car and insurance payment, by your pre-tax monthly income.
- Payment to income limit – Lenders also generally like to see a payment to income (PTI) ratio of no more than 15% to 20%. Your PTI can be calculated by taking your estimated car payment and dividing it by your pre-tax monthly income.
But most lenders also have rules regarding part-time jobs, including situations in which an applicant has multiple part-time jobs. In these cases, only one job is used to determine the minimum income requirement.
Here's how it works:
In the first example, applicant A has two part-time jobs. The first job generates $1,700 in income per month, while the second pays $300 per month for a total monthly income of $2,000.
In the second example, applicant B also has two part-time jobs. The first job pays $1,200 per month, while the second pays $800 per month for a total monthly income of $2,000.
In this situation, if the lender's minimum monthly income requirement is $1,500, applicant A's income would qualify, while the income for applicant B would not. Even though both applicants' total income is the same, only applicant A's income would qualify for a car loan with part time job since the income from A's highest-paying job meets or exceeds the lender's requirement. If you're still confused, be sure to check our car loan estimator.
The Bottom Line
The bottom line is this: if you don’t make enough money with one job, part-time or not, you aren’t getting approved for an auto loan. Make sure you accurately report your income if your job is tip-based, and consider a spouse as a co-borrower if you need an extra boost for approval.
Most subprime lenders will consider income from a part-time job, as long as it meets their minimum income requirement. However, borrowers with poor credit should keep in mind that no matter how many part-time jobs they have, the qualifying income must come from just one of those jobs.
This doesn't mean that a second job serves no purpose when applying for an auto loan, however. That extra income can be key when it comes to meeting the debt-to-income ratio requirement of your auto loan.
One more tip: Auto Credit Express specializes in helping people with less-than-perfect credit find car loans. We've teamed up with a nationwide network of dealerships that can give them realistic opportunities for auto loan approvals.