Many Americans find themselves working multiple jobs. So, it begs the question: can you get a car loan with more than one job? It may be possible to get a car loan with more than one job, but borrowers with less-than-perfect credit need to be aware of how subprime lenders will look at the income from a second job, especially if both jobs are part-time. here's what we know about subprime loans and multiple jobs.
Bad Credit and a Second Job
Here at Auto Credit Express, a consumer that we assume has had past credit issues asked us this question:
"I am trying to apply for a loan but it's only letting me enter one of my employers. I work two jobs and want to know if it's possible to enter both or should I just combine both as to what I make a month."
Yes, you can sometimes combine the income from both jobs on your loan request form. Some lenders are willing to consider income from two jobs provided that you meet their length of employment requirements at both of them.
However, this is lender specific. Some lenders may require you to meet the minimum monthly income requirement from a single job.
So, it can vary from lender to lender. Be prepared to ask about this and be ready to explain this when a dealer calls you.
Income Issues With Poor Credit
The minimum monthly income requirement for credit-challenged car buyers varies by lender, but it typically is around $1,500 to $2,500 in gross (before taxes) wages. Everything else being equal, the higher the income, the better a borrower's chances are for an approval.
More income also comes with other benefits including:
- A larger selection of vehicles
- A wider choice of lenders
- A broader payment range because of a better payment-to-income ratio
- The ability to offset more debt for an improved debt-to-income ratio
With all these advantages, what lender requirements must be met in order to add the income from a part-time job to a person's regular income?
Getting a Car Loan with More than One Job
You can get a car loan with multiple incomes, but lenders only look at the highest-grossing one to determine if you qualify.
From this, lenders will calculate your debt-to-income (DTI) and payment-to-income (PTI) ratios. Note that when you have more than one job, the lender may incorporate the incomes from them as well (depending on how long you’ve had them) to calculate your DTI and PTI ratios.
DTI is important when determining how much car you can afford. It’s easy to calculate, too. Just add up all of your monthly bills such as rent, credit cards, and loan payments, and divide that amount by what you get paid each month before taxes are taken out (monthly gross income). Your DTI should be no more than 50% – any higher and you run the risk of being turned down.
As for your PTI, take your total expected monthly car and insurance payment and divide that by your gross monthly income. Lenders want to see a payment-to-income ratio of no more than 20%.
For an easy online tool, our Car Loan Estimator is a great place to start. This calculator gives you an idea of what you can expect to be paying for your next car loan.
Qualifying Income From a Second Job
In order for a subprime lender to consider part-time income, it must be consistent, meet the lender's job history requirements, and the borrower must be able to prove this as well as the amount. Consistency means borrowers typically must show that they have been receiving this income for at least six months to a year. In order to be able to prove the amount, consumers generally must be able to produce pay stubs or 1099 forms.
Lenders will also typically give more weight if the additional income is from the same field of work – for instance, someone in a skilled trade that also regularly does this work on the side, or who works for a software company that also does programming on the side.
There's also one more thing to consider: not all subprime lenders will necessarily consider a part-time job as additional income. This is why they must explain the combined income on the application when interviewed by the dealer.
Additional Income: Tips and Self-employment
When it comes to second or third jobs, lenders will look to see how long you’ve been working there. Typically, lenders like to see that you’ve held down your job (or jobs) for at least six months to a year. Stability is important, and lenders want to make sure you’ll have a solid income throughout the loan term.
If one or more of your income sources relies heavily on tips, make sure they’re reported each year. It’s illegal to only report only a portion of the tips you earn, and not doing so can affect your chances of getting approved for an auto loan. Because earned tips are verifiable income (reported to the IRS) if you only report a portion of what you actually earn, your reported income could end up being less than the lender’s minimum income, DTI, or PTI requirements, hurting your chances of getting a car loan.
If your main or secondary source of income is as a contract employee (self-employed) and reported on a Form 1099, you aren’t automatically disqualified from qualifying for an auto loan. What you’ll need to do is verify your income with the proper documentation – typically three years of your most recent tax returns – to show the lender. As long as you meet the lender’s basic income requirements (in this case your net income from Schedule C), it won’t matter if you’re self-employed.
The Bottom Line
If you have two or more sources of income, make sure that one of them meets the lender’s minimum income requirement. If you have bad credit on top of that, it can be challenging to find a lender that'll work with you. Luckily, at Auto Credit Express, we specialize in connecting credit-challenged car buyers with dealers that have these types of lenders.
Don't forget, since not all subprime lenders allow you to add the income from a second job to meet the minimum monthly income requirement, consumers need to explain their circumstances to the dealer during the initial interview.
One more thing to remember: We match consumers with tarnished credit to dealers that can offer them their best opportunities for auto loan approval. So, if you're ready to establish your credit, you can begin now by filling out our online car loan request form.