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.
Meeting the Income Requirements
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 $2,000 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 percent. 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 15 to 20 percent. Your PTI can be calculated by taking your estimated car payment and dividing it by your pre-tax monthly income.
Buying a Car with a Part-Time Job or Multiple Jobs
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.
Looking for a Lender to Work With?
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.
If you’re ready to apply for a car loan, but worry your credit is holding you back, let Auto Credit Express help. We connect car buyers with dealers that have the lending resources available. We’ve helped millions nationwide, and we want to do the same for you. Get started today by completing our auto loan request form.