In some cases, it's possible to get an auto loan with an offer letter as proof of employment. However, if you have bad credit, the lender may have to look a little deeper. Here’s what documents you can use to prove your income, and how your credit score can determine your course of action.
Proof of Income: Offer Letter
An offer letter is a letter from an employer that states you’ve been hired. It typically includes items such as your projected salary/hourly pay, start date, benefits, and other information. Usually, an offer letter is sent to you once you’ve been selected for the position, and the letter is what you use to determine if you want to accept the job offer.
Typically, check stubs are what’s used to prove your income source for an auto loan. If your credit score is good or excellent, a lender may not care too much about your proof of income. If you just accepted a job and you have an offer letter in hand, but need a vehicle before you’ve gotten that first check stub, then it may be possible. Your credit score is a reflection of your history of repaying credit, and if you’ve got a good track record, an offer letter may be enough to meet income requirements.
However, with bad credit, it may be another story.
Subprime lenders – third-party lenders signed up with special finance dealerships that work with poor credit borrowers – typically require a recent computer-generated check stub with year-to-date income listed. Subprime lenders use your minimum monthly gross income to determine if you have enough income to repay a car loan. Typically, they require that you make around $1,500 to $2,500 before taxes each month.
If you only have an offer letter and haven’t officially started, or haven’t gotten a check yet, then getting an auto loan could be tough. There are some gray areas to this standard requirement, though.
Income Gray Areas of Bad Credit Car Loans
Every auto lender varies in their specific requirements, and this includes what they can or can’t accept in terms of proof of income. Generally, subprime lenders ask about your last three years of work alongside other requirements. Many of them require that you haven’t had a gap longer than 30 days between jobs before considering you for an auto loan.
Here are some unique work situations and how subprime lenders may consider them:
- Your first-ever job – If you have an offer letter for your first job and it’s your only proof of income, then you may have to wait to be considered for a subprime car loan. Subprime lenders rely on your work history and income source to get a better idea of you as a borrower, and without at least six months to a year of this, it can be difficult to obtain a car loan.
- Job change in the same field – If you just got a new job, a subprime lender may be willing to work with you if it’s the same line of work as your previous job(s). For example, if you were a nurse for four years, and this new job is another health care position at another practice, an offer letter may be acceptable because you’re staying in the same field.
- Contract worker – Not everyone has W-2 income; many borrowers have 1099 income sources with self-employed status. If your line of work involves taking on a few different contracts frequently, but it’s the same line of work, you may be considered for financing. Know that many subprime lenders typically require two to three years of tax returns as proof of income for 1099 income.
- Multiple income sources – If you have more than one source of income, such as two part-time jobs or unearned income such as alimony or Social Security, then your additional income sources may be considered. However, with two part-time jobs, a subprime lender is likely to consider the length of time you’ve been at both jobs and many just require one source of income to meet the initial requirements. With additional income like alimony, it may be used to lower your debt to income ratio.
These are just a few examples of unique work situations that borrowers might be in when trying to get a bad credit auto loan. Some borrowers are in even tougher credit situations such as bankruptcy or repossession, but subprime lenders are often able to assist in these circumstances, too. As long as you can prove your ability to repay an auto loan by meeting all the lender requirements, you may not be out of the running for a car loan.
Finding a Dealership
Car dealerships are all over – in fact, you may have a few in your hometown! Lenders are common, too, especially direct lenders such as credit unions, banks, and online lenders. However, many traditional lenders are unable to assist borrowers with poor credit, and applying for a lender that isn’t right for your credit situation could lead to hassle, stress, and wasted energy. But here at Auto Credit Express, we want to extend a hand.
We’ve created a coast-to-coast network of special finance dealerships that assist bad credit borrowers. If you’re ready to get on the road with a car loan, then complete our free auto loan request form. We’ll look for a special finance dealer in your local area!