Easterns Blog

Even if you have a low credit score and a poor credit history, a job can be your saving grace if you’re in desperate need of an auto loan. Minimum income requirements ensure applicants can make the monthly payments, mitigating the risks for lenders loaning to low-credit borrowers and increasing the chances of a low-credit borrower’s application being accepted. A reliable income also helps reduce the risk of a borrower being unable to make a payment and potentially worsening their financial situation.

Meeting or exceeding the minimum income threshold increases the likelihood of loan approval and may lead to more favorable loan terms, such as lower interest rates and longer repayment periods.

What Are the Minimum Income Requirements for a Bad Credit Car Loan?

Typically, an applicant must make a gross income (or money made before taxes) of at least $1,500 a month from a single job, or $18,000 annually, to qualify for an auto loan. You must have been at the job for more than six months, and the income must be taxable – side hustles, tips or unverifiable income won’t count.

Gross income can include other revenue sources, such as Social Security and retirement benefits, but these sources can only add supplementary value to your application – they can’t replace employment income.

To prove your job’s income, you need to include with your application:

• Printed pay stub that shows year-to-date earnings, if possible
• Latest W2 form
• Bank statement
• Tax return if you’re self-employed
• Letter of employment

Common Types of Income Accepted

• Employment Income: Employment income can either come in the form of wages or salaries (salaries are preferred since they’re more consistent, but both qualify) from a full-time, part-time or self-employed position. Self-employment will require more proof to verify.

• Social Security Benefits: Social Security benefits, such as disability benefits, can be included as additional income if you have government documents confirming the receipt of benefits.

• Alimony and Child Support: Court-ordered alimony and child support payments, proven with divorce decrees, court agreement and correspondence with the other party.

• Pension or Retirement Income: Income from pension plans, 401(k) accounts or other retirement savings, as evidenced by pension statements and IRA or 401(k) withdrawal records.

• Other Income Sources: Rental income, investment dividends or royalties.

What Is Debt-to-Income Ratio?

Debt is another critical component of minimum income requirements. Some subprime lenders may measure your income against any debts you’ve incurred to ensure you’re able to make your monthly payments on a consistent basis. Put simply, is your gross monthly income greater than your monthly debt?

To figure out your debt-to-income ratio, you calculate your monthly debts (e.g., rent, college loans, etc.) by your monthly income (e.g., employment wages, retirement income, etc.). A final percentage of 36 percent or lower is looked upon favorably by lenders. Anything higher suggests that your other debts may interfere with your ability to pay your new loan in full, lowering your application’s chances of being accepted.

We’ve Helped Low Credit Car Shoppers Find the Right Car with the Right Financing Solution

At Easterns Automotive Group, we offer an extensive collection of thoroughly maintained, certified pre-owned cars to DC, Maryland and Virginia drivers at competitive prices. You don’t have to worry about your credit score with us – instead, Your Job is Your Credit™. As long as you have a job, we’ll utilize our relationships with banks and auto lenders to secure the auto loan you need to drive home in the car you want.

Some lenders may try to charge low credit borrowers exorbitant interest fees out of fear they won’t pay back their loans. Our financial experts have years of experience negotiating with lenders and will fight on your behalf for a favorable loan with a competitive interest rate and flexible terms.

We’ve received DealerRater’s “Consumer Satisfaction Award” award for over seven years for our dedicated customer service. We make the financing process hassle-free with quick approval decisions so our customers can drive away in a certified and refurbished pre-owned vehicle sooner.

Learn more about how we’ll help you finance an in-demand, certified pre-owned model today online or at one of our eight dealerships.