Your payment to income (PTI) ratio is what auto lenders use to determine a car payment that fits your budget. It’s one of two important calculations bad credit lenders use when qualifying applicants. Estimating your PTI ratio before you even set foot in a dealership is a smart way to prepare for an auto loan.
Understanding Your Payment to Income Ratio
Subprime lenders require applicants with bad credit to make a certain amount of income. Most look for a minimum income of $1,500 to $2,000 a month before taxes from a single source.
Once they know how much you make, they can determine your payment to income and debt to income (DTI) ratios. Your DTI ratio compares your income to your monthly bills, and you can calculate your DTI ratio and learn more about it here.
While your DTI ratio focuses on your monthly expenses, your PTI determines your monthly car payment range. Subprime lenders typically cap your PTI between 15 and 20 percent of your income before taxes, because it’s extremely important that you choose a vehicle you can afford.
Estimating Your PTI Ratio
A subprime lender is going to calculate your PTI when you finance a car, but you can estimate it yourself before you go. All you need is a calculator, and your monthly income before taxes (called your gross income).
To find your maximum monthly payment amount, take your monthly pre-tax income and multiply it by 0.15, and then by 0.20. This gives you a range of the maximum amount these lenders generally allow you to spend.
For example, if you make $1,900 a month before taxes, your maximum car payment might be anywhere from $285 (15 percent) to $380 (20 percent). Knowing this ahead of time can help you narrow down your vehicle search and give you a better idea on how much car you can truly afford.
If you want to be a little more specific with your numbers, you can use our Car Loan Estimator and see what your estimated approval amount could be based on your credit profile and monthly bills.
Ready to Find Auto Financing?
If you ran the numbers to get an estimate of your PTI and feel ready to take on a car loan, you don't have to worry about your credit holding you back with Auto Credit Express.
We've been helping consumers get the financing they need for 20 years by connecting them to local dealerships that have the right lending resources to work with people who are struggling with poor credit.
Getting started is a breeze. All you have to do is fill out our free and easy auto loan request form, and we’ll get to work connecting you to a dealership near you right away.