Auto Loans for People on Disability with Bad Credit

Get Car Financing
Even with poor credit.

By

Contributing Writer

David Topham covers the automotive and auto finance industries as the Content Manager of Auto Credit Express who also contributes to CarsDirect. He was born and raised in Michigan and is a graduate of Michigan State University.


, Contributing Writer - March 6, 2018

Because of subprime lenders' strict income requirements, consumers with bad credit whose only source of income is disability (or another form of unearned income) will struggle to qualify for a car loan.

Bad Credit Auto Loan Income Requirements

For car buyers with good or great credit, their source of income doesn’t matter. Lenders will confirm an applicant meets their requirements by looking at the information stated on their application and move forward.

On the other hand, subprime lenders who finance bad credit auto loans have more rigid income requirements. These typically include:

  • A minimum income of $1,500 to $2,000 a month before taxes.
  • A debt-to-income ratio that doesn't top 45 to 50 percent.
  • A payment-to-income ratio of no more than 15 to 20 percent.

Borrowers can use fixed sources of income, such as disability or social security benefits, to meet these requirements in most cases. Subprime lenders also require proof of income with the appropriate documents, so borrowers must be able to verify any benefits they receive. Additionally, subprime lenders often specify borrowers have to receive unearned income for at least six months prior to applying and they must show they'll continue to receive it for the term of the loan.

The Issue for Borrowers on Disability with Bad Credit

Borrowers with poor credit who depend on benefits can struggle to qualify because of another subprime lender limitation: they typically require additional earned or W-2 income sources because unearned sources aren't able to be garnished.

In the most extreme cases, when a borrower stops paying on their loan and the lender repossess the car, lenders must be able to garnish a portion of a borrower's income to recover any losses. This presents problems for borrowers whose only source of income is disability – or other types of benefits such as social security, public assistance, or a pension.

In many cases, the only ways to get approved are if:

  • A borrower makes additional earned income. If a borrower works in addition to their benefits, they may be able to qualify even if only a small portion of their income is garnishable.
  • A borrower has a cosigner who makes earned income. Borrowers can get a cosigner whose income can be garnished to qualify.

Without either of these solutions, the only other option to finance a car is likely with a buy here pay here dealership.

The Bottom Line

People on disability without another source of income will have trouble qualifying for a car loan if their credit is in bad shape. The same goes for borrowers who receive other types of unearned income.

If you're struggling with credit problems and need a car loan, it helps to get connected with the resources that know how to help. CarsDirect matches consumers in unique credit situations to local dealerships that specialize in subprime financing. You can get that process started by completing our secure and free auto loan request form today.

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, Contributing Writer

David Topham covers the automotive and auto finance industries as the Content Manager of Auto Credit Express who also contributes to CarsDirect. He was born and raised in Michigan and is a graduate of Michigan State University.


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