Credit-challenged borrowers will find that it's very difficult qualifying for a car loan if their only income comes from monthly disability payments

Here at Auto Credit Express we recently fielded question from a potential applicant with tarnished credit that went like this: "How do you go about applying for a loan when you have income from SSI disability benefits, but no job."

The answer to this question is, "If you have really good or great credit it shouldn't be a problem, but if your credit is bad it could be a real problem – although there are alternatives if you have a decent down payment."

Tarnished Credit and Disability Income Rarely Mix

For borrowers with credit issues, it’s not easy getting approved for a car loan if a portion of their income comes from disability or SSI payments, while it can be nearly impossible if all of their income comes from a source like this.

The reasoning behind this is simple: Social Security disability payments as well as income from most disability policies (According to the website, this rule typically also applies to “private disability insurance payments.”) cannot be garnished. This means that if a borrower with disability income has a car repossessed, the lender can't garnish that income source in order to pay off the amount due the lender on the loan contract.

But for borrowers with credit issues that have a decent down payment, there is an alternative.

Buy Here Pay Here Dealers

Most buy here-pay-here dealers that offer in-house financing (the dealer, not a bank, lends borrowers the money to finance a vehicle) will consider an applicant with this type of income if they have a down payment either in cash or trade equity in a vehicle they're currently driving.

The down payment amount depends on the vehicle and the dealer, while the interest rate can also be very high, but for borrowers whose only income source is a monthly SSI disability payment, this option is often the only choice they have.

The Bottom Line

Both private and SSI disability income is usually an issue with any car loan but it’s an even bigger problem if the buyer has tarnished credit. For most borrowers in this situation, the only alternative is a buy and pay here, tote the note, dealer that offers in-house financing - and we can help you get started. Just fill out our quick and easy car loan application online, now.