Child support income, like other types of non-taxable income, typically can't be used as a sole source of income when you're financing a car with bad credit. There are specific requirements that lenders have regarding income and employment, and the source of your income usually plays a role.
Earned Income Requirements for Bad Credit
When you're financing a vehicle with bad credit, you have to meet a lender’s income and employment requirements. Even though these vary, there are some things that all lenders need, such as proof of earned income. The reason for this is because earned income is taxable and can be garnished – seized with a court order to settle a debt if needed.
Taxable income can be either earned income, such as salary, hourly wages, commission, or tips, or unearned income, such as interest, rent, alimony, winnings, or dividends. Typically, any type of earned income can be garnished, while many forms of unearned income can't be.
Some examples of non-garnishable income include:
- Child Support
- VA Benefits
- Social Security Benefits
- Social Security Disability Benefits
- Unemployment Compensation
- Workers' Compensation
- Pensions and Retirement Plan Income
- State Public Assistance (varies by state)
If your only income comes from a non-garnishable source, it can be difficult to get a loan unless you have a co-borrower with enough earned income who meets the auto loan requirements of the lender.
Auto Loan Options without Earned Income
If you need to buy a car and only have unearned income, all hope isn't lost. You may still be able to get the vehicle you need by going to a buy here pay here (BHPH) dealership.
BHPH dealers don't have as many income rules as typical subprime lenders that work with bad credit car buyers. In fact, as long as you meet the income and down payment requirements of a BHPH dealership, you can usually finance a vehicle. These dealers are also lenders, and usually aren’t concerned with details like where your income comes from.
When you visit a BHPH car lot, you choose a used vehicle from their inventory, so the car you pick determines how much you need to put down. Don't expect to find the latest models with low mileage, though these gems can sometimes be found, but you shouldn't settle for a clunker that's falling apart. Like all used vehicles, make sure you have it inspected by a certified mechanic before signing on the dotted line.
It's also good to know that not all BHPH dealerships check credit. However, if they don't, it's possible that they also won't report your payments to the credit bureaus. This means making on-time payments may not help you improve your credit score. Also, you may be required to make payments more often, perhaps every week or two, and you may have to do so in person.
Need to Find a Dealership?
Now that you know you can still finance a car without earned income as long as you have a co-borrower or work with a buy here pay here dealer, you may be wondering where you can find a special finance dealership that can help. That's where we come in.
Here at Auto Credit Express, we work with a nationwide network of special finance and BHPH dealers that want to help you get into the vehicle you need. If you're ready to find your next car, simply fill out our fast, easy, and no-obligation auto loan request form, and we'll get to work matching you with a local dealership!