One of the most important factors in getting a bad credit car loan is your income. It’s just one of the many qualifications that you need to meet in order to be considered for an auto loan by a subprime lender. They look at additional factors, not just your credit score or income, to determine approval.
Why Income Is Key
It’s clear that you can’t get a car loan if you don’t have enough income to repay it. What may not be so obvious is that by judging your ability to pay back a loan, lenders are actually keeping bad credit borrowers safe from even worse credit situations.
As a borrower with a history of late or missing payments, subprime lenders look a bit further into your situation to see why these things are showing up in your credit history. Maybe you had unexpected medical bills, or a loss of long-time employment. Those issues are considered situational bad credit, and may be looked upon less harshly by these lenders.
On the other hand, if your payment history has been spotty for a long time, and it’s clear you often attempt to get credit or take on loans and default on them, you’re likely to have a tougher time getting approved. This is the result of habitual bad credit.
Subprime lenders that work with bad credit borrowers take these issues into consideration because they want you to be successful with your auto loan. A successful car loan is a great way to build credit.
Income Requirements for Subprime Financing
Income requirements vary from lender to lender, but subprime lenders typically have general guidelines they follow for a minimum income. This minimum gives them a baseline for your ability to take on an auto loan.
Usually, the minimum income to qualify for a loan is anywhere from $1,500 to $2,000 a month before taxes, from a single job, although the higher the better.
You must bring your most recent computer-generated check stub showing year-to-date income with you when you visit the dealership to serve as proof of income. If you’re not a W-2 employee, and are self-employed or an independent contractor, you typically need to bring in two or three years of tax returns in order to prove your income.
No Proof of Income?
If you can’t prove your income, or don’t meet the minimum qualifications of a subprime lender, you're not out of luck. In these cases, you may be able to get a car loan through a buy here pay here dealer.
These are a type of in-house financing dealership, where the dealers are also lenders. This allows them to be a bit more lenient when it comes to financing. They’re more concerned with whether or not you can make the required payments than where your income comes from. They’re still going to be looking into your income, but depending on the vehicle you choose, you may not need as high a minimum income.
Be cautious, however, as buy here pay here dealerships only sell used cars, and they come with higher interest rates than you’re likely to see at a special finance dealer. Also, with either a subprime lender or an in-house dealership, you’re typically required to make a down payment as a bad credit borrower.
Ready to Find Your Next Vehicle?
Now that you know what’s expected of you as far as income, you can begin to plan for your next vehicle. If you need help budgeting or want to estimate how much of a loan you could qualify for, use our Car Loan Estimator. Then, when you’re ready to take the next step, we can help with that, too.
Here at The Car Connection, we work with a nationwide network of special finance dealers that have the lending resources available to help people in tough credit situations. Let us help connect you with a local dealership.
Just fill out our free, zero-obligation auto loan request form and we’ll get to work for you! What are you waiting for? Get started right now!