You can still get a car loan if your income is Social Security, but it can be more difficult if you have less than perfect credit. Subprime lenders – those that specialize in financing people with bad credit – have specific rules about earned and unearned income. Social Security, which is a type of unearned income, can cause complications if you have bad credit.
However, subprime lenders aren’t your only option when it comes to getting an auto loan. It may still be possible to get financed if Social Security is your only source of income at an in-house financing dealership.
Income Requirements for an Auto Loan
When it comes to buying a vehicle, lenders first check to make sure you make enough money to afford a car loan, regardless of your credit.
If you have good credit, a lender isn’t going to be concerned about the source of your income and may not even ask for proof of income. If you have bad credit, however, there are more specific rules you have to meet, and you usually have to provide proof of income. Let’s discuss the income requirements set by lenders if you have bad credit.
Subprime lenders typically set the minimum monthly income requirement for a bad credit auto loan at $1,500 to $2,000 before taxes. They want this income to come from one source, and Social Security can be counted. You can have multiple jobs or multiple sources of income, but these lenders only consider your highest-earning source to qualify you for the minimum requirement.
However, subprime lenders are looking for earned income, or W-2 or 1099 income. Sources of unearned income, like Social Security, can be used to boost your application outside of the minimum income requirement, but they present a problem because they can't be garnished.
Subprime lenders require at least a certain portion of your income to be garnishable. If your only source of income is Social Security, this likely is going to keep you from getting approved for a bad credit car loan with a subprime lender.
You may be able to qualify if you earn enough additional income that can be garnished alongside your Social Security, or if you add a cosigner or co-borrower with a garnishable income to the loan.
If you don't make any earned income and can’t add a cosigner or co-borrower to the loan, an in-house financing dealer may be the only way to go.
Getting a Car Loan at a Buy Here Pay Here Dealership
Because of the income rules subprime lenders have, you may have to look elsewhere for a loan. Your next best bet is to visit a buy here pay here dealership, which is a type of in-house financing dealer.
These places operate as both dealerships and lenders, so they don't rely on outside sources for financing. Their calling card is they often don't check the credit of applicants.
Instead, they base what you qualify for on your income, but they usually don't care about the source of it. As long as you have enough to afford the loan payments, these dealers don't care about where your income is coming from like subprime lenders do.
The bottom line is this: if your only source of income is Social Security, you should be able to get an auto loan from an in-house financing dealership without issue as long as you meet their minimum income requirement.
The Bottom Line
If you rely solely on Social Security income, you're likely going to have trouble getting approved for a car loan with a subprime lender. However, if you have another source of income that can be garnished or a cosigner or co-borrower with one, this can turn the tides in your favor. If not, there are always in-house finance dealers.
Auto Credit Express can help you find a dealership that works with unique situations. We're teamed up with special finance dealers all over the country, and we can match you to one near you. Simply fill out our easy, fast, and free auto loan request form to get the process started today.