Bad credit car loans involve different requirements in order to qualify for one. If you only work part time or have multiple part-time jobs, you need to be aware that these factors can affect your chances of getting a loan.
Income Requirements on Subprime Car Loans
When it comes to subprime auto loan income requirements, there are generally three different factors to consider:
- Minimum Income of $1,500 to $2,000 a Month – While there's no nationwide standard, subprime lenders typically look for around $1,500 to $2,000 in monthly wages before taxes are taken out. This needs to be W-2 income from a single source, and you have to be able to verify it with the appropriate documentation. Most lenders are looking for a recent computerized pay stub that lists year-to-date earnings as proof of income.
- Maximum Debt to Income Ratio of around 50 Percent – Poor credit lenders also look at your reported earnings compared to your monthly bills in what is known as a debt to income (DTI) ratio. Divide your monthly bills by your pre-tax monthly income to find your DTI. For example, a person with $1,500 in expenses who makes $3,500 a month has a DTI ratio of 42.8 percent. Subprime lenders usually set the maximum allowed DTI ratio at 45 to 50 percent.
- Maximum Payment to Income Ratio of around 20 Percent – The payment to income (PTI) ratio is another calculation lenders use to set a maximum car payment. PTI is found by estimating a car and insurance payment and dividing by pre-tax monthly income. The subprime standard for maximum PTI ratio is typically between 15 and 20 percent.
These requirements sometimes make qualifying with a part-time job or multiple jobs tricky.
Part-Time Job Income
You can get approved for a bad credit car loan even if you only work a part-time job, but only under the right circumstances. This starts by meeting the minimum income requirement with only one job. Lenders care about you making enough income to qualify, not as much about the hours it takes to make it.
However, subprime lenders also consider employment stability and time on the job. It helps when you can show your income is consistent and long term. This can spell trouble for applicants with less than a year of time on the job or seasonal employment.
Additionally, applicants who earn tip income can run into trouble. If employees who consistently earn tips aren't accurately reporting their income, it could throw off their DTI ratio and lead to a denial.
Qualifying with Multiple Part-Time Jobs
The tricky part about qualifying for an auto loan with bad credit if you work multiple jobs is that you need to meet the minimum requirement with the earnings from one job. Lenders will look to your primary job – the one that's your highest earning – for the $1,500 to $2,000 monthly minimum.
For example: let's say car buyers Sam and Jon both work two part-time jobs. Sam makes $1,700 a month at one job and $400 a month at the other, while Jon's two jobs pay $1,200 and $1,000 per month, respectively. Jon, though he makes $2,200 a month compared to Sam's $2,100, will not be able to qualify because he doesn't make enough to meet the minimum requirement with just one job.
However, your earnings from other jobs aren't lost on these lenders. They will use it as part of your DTI and PTI calculations, which can help your chances of qualifying, the terms available to you, and your selection of vehicles.
The Bottom Line
If you work a part-time job or multiple jobs, make sure you're aware of the subprime lender income requirements. Also, be prepared to provide proof of income from each of your jobs with the appropriate documents.
If you're dealing with credit trouble and need a car loan, Auto Credit Express can help you get connected to a local dealership. Our nationwide network of dealerships specializes in assisting people with less than perfect credit. Get the process started by filling out our free and secure car loan request form today.