Does the source of your income for a car loan matter?
When you apply for a subprime loan, you must have all of your employment and income documents handy. The reason this is so crucial is that during the application process you will need to provide this information to a lender. If you can’t do it, they won’t be able to approve you.
So, yes, how your income is generated matters when you apply for a car loan. This is why precision is important.
Lenders will take your reported income and compare it to your monthly expenses such as rent, utilities, and other debts. This is called the debt-to-income ratio (DTI). So if you are making $ 4,000 a month but your rent and expenses are $ 3,000, that alone can prevent you from getting the financing you need.
In a situation where you have multiple jobs, a lender may only consider the most lucrative of the two – or even all three – jobs you might have. This means that you will only be approved based on the amount you earn for what the lender considers your main job.
You need your employer’s pay stubs to prove these numbers. In the case of the self-employed, you will need 2 to 3 years of professionally prepared tax returns and the credit decision will be based on your net income during this period.
When it comes to overtime, you need to show a consistent pattern of this type of income to the lender so that they can use it on your loan application. You must be able to prove that this type of remuneration has been part of your remuneration for at least one year.
What about other forms of income?
In some cases, borrowers may receive income from another source. They might have government benefits or even court-ordered alimony from an ex-spouse. However, not all of them can be used to qualify for a loan.
Alimony and child support. If you can prove that these payment agreements are legally binding, consistent, and will continue for the life of the loan, you can use them.
Unemployment, Disability & Social Security. While this type of compensation is government funded and therefore is a guaranteed source of income while you are eligible for it, lenders will still consider it a higher risk as lenders are unable to grab these forms. of income if you stop paying.
In cases where your primary form of income is not acceptable, you may always have another option. You can always consider having your wife or husband co-sign the loan for you. Or, another route is just waiting for your fortune to turn around to get another vehicle.
Also, the income required for an auto loan comes in gross income. Make sure you provide this number and not your after-tax income.
If you are ready to go ahead with the purchase of another car, Auto Credit Express can help. We work with lenders specializing in special auto financing that are not limited to your credit. Get started now by completing the quick and easy online application. Let’s see what we can do to get you back on the road today.