Not everyone has a W-2 job that supplies them with a computer-generated check stub every two weeks. If you’re in this boat with an income that’s not W-2 and need a car loan, here’s what the lender is most likely to ask of you to prove your income.
Proving Your Income for a Car Loan
If you make W-2 income and simply don't have your check stubs at home or readily available, contact your employer or human resources department. They should be able to send you copies of your computer-generated check stubs either through mail or electronically.
Proving you have income to repay an auto loan is one of the most important parts of getting approved for financing. If you don’t get or have check stubs to prove your income, the lender is likely to ask you for two to three years of tax returns.
Many borrowers wonder if bank statements showing deposits of their income would suffice, but it usually doesn’t. Unfortunately, bank statements only prove that you have money, not where it’s coming from, so lenders don’t often accept them. It also doesn’t prove that the income is being reported or taxed, and it may not accurately reflect what you make every year.
To qualify for a car loan, many subprime lenders require that you make around $1,500 to $2,500 a month before taxes. Lenders look at your gross income, not your net (bring home). When you’re listing your income, make sure you’re putting your gross income, as it could mean the difference between an approval and a denial if your income is close to the cutoff.
1099 Income and Auto Loans
Many freelancers, contractors, and business owners have 1099 income. Auto lenders may be able to accept this income type if it’s provable and reported.
But that’s not the only thing that lenders look at.
If you have less than perfect credit and 1099 income, then expect a subprime lender to examine your work history along with your income. Regardless of your income type, bad credit lenders look at the other aspects of your financial stability to determine your ability to take on a car loan.
They sometimes require a consistent work history of three years, without large gaps between jobs (30 days or longer generally being considered a large gap). A subprime lender may also require that you’ve been at the same workplace for around a year.
There are some job scenarios that subprime lenders accept on a case-by-case basis as well. This includes switching jobs recently in the same field of work. Say you’re a contractor that recently started a project under a new company two months ago. While it hasn’t been a year, if you’re doing the same type of work, a subprime lender may accept it as qualifying work history.
Bad credit lenders look at your work history because a consistent, stable employment history increases your chances of completing the auto loan successfully. The more stable you are in terms of income, work history, and even your living situation, the better your chances of getting approved for the car loan.
Proving Other Types of Income
If you don’t have W-2 or 1099 income but you do receive another income type regularly, you’re not out of luck.
Some auto lenders, including subprime lenders, may accept other income sources such as permanent disability, alimony, child support, or Social Security. Some lenders may only accept these income sources as secondary income, but this varies.
Proving these incomes typically means providing an award letter that proves you’re going to be receiving that money for the entire duration of the car loan you’re applying for. They may also request your tax returns, and possibly your bank statements to show that you have access to the money.
Bad Credit Car Loans
Even if you have sufficient income to pay for a vehicle, and your tax returns lined up to prove you’re ready and able to make the payments, it may not be enough if you have less than perfect credit. However, subprime lenders understand that your credit score doesn’t always reflect your creditworthiness in a perfect light.
To get matched to a dealership that’s signed up with subprime auto lenders, start right here at Auto Credit Express. We’ve created a network of dealers that are equipped to help borrowers with credit challenges. Begin your car shopping journey by filling out our free auto loan request form, and we’ll point you to a dealership near you with subprime lending resources.