When you're struggling with bad credit, there are certain standards that a lender asks you to meet before they approve you for an auto loan. There are many different income and employment requirements for bad credit car loans – after all, you can't qualify if you don't have a way to pay it back.
Subprime Lender Requirements for Car Loans
Subprime lenders – who work specifically with bad credit borrowers through special finance dealers – want to make sure that you have the ability, stability, and willingness to repay an auto loan.
In order to verify that you meet their qualifications, lenders typically ask you to provide proof with supporting documents and make a down payment to show you're willing to commit to your own success.
A major piece of the puzzle gets filled in when you provide proof that you can afford to make the monthly loan payments, and that you are able to continue to do this.
These are the typical income and employment requirements:
- Income of between $1,500 and $2,000 a month before taxes from a single source of employment
- A recent computer-generated pay stub showing year-to-date income if you're a W-2 employee, or two or three years of tax returns and recent bank statements showing proof of taxable self-employment or 1099 contract income
- A minimum of six months with your current employer
- A minimum work history of three years with no major gaps lasting more than 30 days in between jobs
Once a lender receives this information, they calculate if you can comfortably afford a car loan. They add up your total monthly bills (which you listed on your application and shows up on your credit reports) together with an approximate loan and insurance payment. The lender then subtracts the total from your pre-tax monthly income. If your bills total more than half your income, chances are you won’t get approved for an auto loan – at least not on your own.
What If I Can't Meet the Income and Employment Requirements?
If your income or type of employment doesn't meet the qualifications, you may be able to get approved by adding a co-borrower to your loan. Doing this means you're willing to share ownership of the vehicle with whoever you get to sign the loan with you.
Since a co-borrower that's a spouse can combine their income with yours, the lender may allow you to add them as the primary borrower on the loan, and use their income and employment. This means you would share the responsibility for the car and its payment with the co-borrower.
With continued on-time payments, your credit should begin to improve as long as you keep up with your other bills. After at least one year, assuming your credit and job or taxable income situation has also improved, you may be able to refinance the loan and become the only person responsible for it.
A Last Resort for Financing
If you aren't able to go through a subprime lender due to an inability to meet the income or employment requirements, your last option is to look for an auto loan from a buy here pay here (BHPH) dealership.
These dealers are the lenders and don't rely on outside sources to finance the vehicles on their lots. Because of this, they're more concerned with if you can make your payments rather than where your income comes from.
Be aware, however, that the down payment requirement and interest rate are likely to be higher at a BHPH lot than they'd be through a subprime lender. Also, they only carry used cars, some of which are older models. Still, this can be a good opportunity to get the transportation you need to get you through a rough patch.
Let The Car Connection Guide You
Here at The Car Connection, we understand how tough it can be to get an auto loan with bad credit. That's why we want to help take the hassle out of finding a place to start.
We work with a nationwide network of dealerships that have the lending specialists you're looking for if you need a bad credit car loan. Simply fill out our easy, fast, and free auto loan request form today, and we'll start the process of matching you with a local dealer. Don't wait any longer – get started now!