You need to buy a car, so you may be wondering: "Do I make enough money to qualify for an auto loan?" This largely depends on the state of your credit and the amount of your monthly income that goes towards recurring debt. Also, what kind of vehicle are you looking to purchase?
Credit Issues and Your Debt to Income (DTI) Ratio
If you have excellent credit and a reasonable amount of disposable income, your DTI ratio won’t be a huge factor in your ability to get approved for a car loan. However, if your credit score is low enough to be considered "fair" to "poor," what you pay out in bills every month vs. your income will be strongly considered.
If your credit is less than ideal, most lenders (those who will accept bad credit borrowers) will want to see no more than 50% of your income going towards debt every month, and this includes your potential car payment. In order to illustrate how this works, let's take a look at a real life example.
Can Tim Afford to Buy a Car?
Tim needs to purchase a vehicle, but his credit score is around 600, so his credit is considered "subprime." He has had the same job for over 2 years, and he brings in $3,000 a month. Tim pays $600 a month for rent (he has a roommate), and his other bills amount to around $300. Because, ideally, his recurring debt (based on his current income) should only amount to approximately $1,500, Tim should keep his car payments (including insurance costs) at or below $600 a month.
He should be able to get approved for financing, but at the same time he should be realistic about what kind of vehicle he chooses to buy. He will also have to consider the cost of owning his car when he visits the dealership. Tim is a single guy and he has a fairly long commute to and from work. A new or used compact car that gets good gas mileage should suit his needs and budget quite well. And the less he ends up spending on his vehicle, the more he will be able to put into his savings every month.
Minimum Income Requirements
Instead of trying to find a lender on his own, Tim played it safe (and smart) and contacted Auto Credit Express. We found a dealer in his area who quickly matched him with his perfect car and arranged financing for him through an understanding subprime lender.
If your situation is similar to Tim's, we can help you, too. We do, however, ask that you have a monthly income of at least $1,500 (gross). This is because we want you to be able to comfortably afford the car that you purchase. If you were to buy a vehicle and discover that your income can't support the payments, you could end up damaging your credit even further, and that's the last thing that anyone wants.
Getting Back on the Road
When you're ready to buy the vehicle that you need for your everyday life, Auto Credit Express is all set to connect you with a dealer who can get you approved for financing. Even if your credit is severely damaged, we can find a solution that works for your situation.
Just fill out our fast and secure online application to get started today.
And if you need money for a home improvement project, school expenses, debt consolidation or for any other reason, click here for information on how to get an affordable personal loan from a credible source.