Auto Loans for Low Income Buyers

Trying to get a car loan is very difficult if you are a low-income earner but with the proper research and planning you can find a lender.

Most low-income car dealers will require a larger down payment or cosigner. Your options to buying a car with low-income may be limited to BHPH dealerships, rent-to-own dealers or another bad credit auto loan provider.

A car loan allows you to spread the total cost of the car across multiple months and is the main way most people purchase a car. If you are low-income or have bad credit, it will be a lot harder to find a loan that’s not going to be high-interest or require a substantial down payment.

Even with that – you have good news. If you do enough research and talk to enough dealers you usually can find one that will lend you a car loan to purchase a car.

There are only a few requirements to getting a car loan with low income:

Most banks or lending institutions will require a sizable monthly income before they feel comfortable giving you money. These lenders will give you a risk value and low-income earners are generally considered high-risk to finance.

Common reasons why you will have trouble getting a car loan with low-income:

Even though most dealers will likely turn you away, it’s not impossible. Plenty of low-income earners have had success working with subprime auto dealers to get in their next car.

The process for getting a low-income car loan is really no different than a standard process but there are some things you should consider and things you should do to increase your chances.

Before you start applying for loans or searching for a car you should pull your credit report and really understand your credit score.

Your credit score is one of the biggest factors when it comes to getting approved for a car loan. You want to try and have a credit score above 650 before applying for a car loan, even with low-income.

If your credit score is between 580 and 650 you may want to consider finding a bad credit car dealer that specializes in subprime financing.

If possible, try to wait until your credit improves over time before applying for a car loan. The better your credit the better the interest rate you’ll have that could save you thousands down the road in interest payments.

You don’t want to go with the first dealer or car lot you walk on. You’ll want to shop around and do your research on the car dealers you’ve selected.

Try to select 3 car lots that you want to work with and get offers from each of them. As a low-income earner you may not have the biggest amount of cars to select from and most car selections will be based on how much they will lend you.

You should focus on finding the offer that gives you the best interest rate and not the highest price. Your #1 goal should be to pay off the car as soon as possible as most car loans in subprime financing are considered underwater.

It may seem like a lost cause with having low-income and possibly a poor credit score but you should talk to your bank or credit union. The worst case here is that your credit union says no.

A credit union or bank will usually give you a better interest and better terms if you can qualify.

If you have bad credit or are low-income, a co-signer is one of the best ways to get approved for a car loan. A co-signer is another individual who agrees to take on the burden of the loan if you can’t pay it off.

There is a lot of risk in being a co-signer so don’t just ask anyone. You’ll want to make sure the person who is co-signing your loan is creditworthy themselves and can truly help you if the loan defaults.

Even without bad credit, a co-signer on a car loan is still one of the best ways to get approved and lower your auto loan interest rate dramatically.

As a low-income earner you will likely be required to place a down payment on your car loan. Low-income car dealers will require anywhere from 3 to 10% down but some may require more, up to 20%.

If you can, try to place a larger down payment that equates to at least 20% of the car’s worth you’re trying to buy. This will help you lower your risk with the bank quite a bit and could net you a better interest rate.

Yes, a subprime lender will require you to make at least $1,500 to $2,500 a month before taxes from a single income source. If you meet this requirement a lender will determine if you have enough income to pay your car loan by calculating your DTI and PTI ratios.

A decent or good credit score and large down payment you can increase your chances of approval with a lower income.

Yes. You will likely have to secure subprime financing and it will require you to have a larger down payment, find a co-signer or have a trade-in. In general, you should expect to make at least $1,500 per month and have 10-20% as a down payment.