When you apply for a subprime loan, you should have all of your employment and income paperwork handy. The reason it is so crucial is because during the application process, you will need to provide this information to a lender. If you are unable to do so, they won’t be able to approve you.
So, yes – it does matter how your income is generated when you are applying for an auto loan. That is why accuracy is important.
Lenders will take your reported earnings and weigh it against your monthly expenses such as rent, utilities and other debts. This is what is known as the Debt-to-Income Ratio (DTI). So if you make $4,000 per month but your rent and expenses are $3,000, that alone may prevent you from getting financed for the amount that you need.
In a situation where you have multiple jobs, a lender can only look at the most lucrative job out of the two – or even three – that you may have. This means that you will only be approved based on the amount you make for what the lender considers your primary job.
You need pay stubs from your employer to prove these numbers. In the case of those who are self employed, you will need 2 to 3 years of professionally prepared tax returns and the credit decision will be based on your net income over that time.
In regards to overtime, you need to show a consistent pattern of this type of income to the lender in order for them to use it on your loan application. You should be able to prove that this type of compensation has been part of your pay for at least a year.
What About Other Forms of Income?
In some cases, borrowers can have earnings they collect from an alternative source. They could have government benefits, or even court ordered support from a former spouse. However, not all can be used to qualify for a loan.
Alimony & Child support. If you are able to prove that these payment agreements are legally binding and are consistent and will continue through the loan term, you can use it.
Unemployment, Disability & Social Security. Although this type of compensation is funded by the government and therefore is a guaranteed source of income while you are eligible for it, lenders will still see it as a higher risk because lenders are not able to garnish these forms of income if you stop paying.
In the cases where your primary form of income isn’t acceptable, you might still have another option. You could always consider your wife or husband to cosign on the loan for you. Or, another route is simply waiting until your fortunes have turned around to obtain another vehicle.
Also, the income requirement for an auto loan is done in gross income. Be sure to provide that number and not your take home after taxes.
If you’re ready to move forward with getting another car, Auto Credit Express can help. We work with lenders who specialize in special auto financing that look at more than just your credit. Get started now by filling out the quick and easy online application. Let us see what we can do to get you back on the road today.
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