Getting a Bad Credit Auto Loan if You're Paid in Cash

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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 - April 24, 2018

Car buyers with bad credit that get paid in cash have a hard time qualifying for an auto loan because subprime lenders require proof of income.

Problems with Proof of Income

Bad credit car buyers that get paid in cash face a lot of landmines. Workers that get paid under the table don't receive a W-2 wage and tax statement. These borrowers have to show proof of income with their income tax returns, which need to confirm a net income that meets the lender's minimum income and debt-to-income standards. Even if a borrower is making enough to qualify, it doesn’t matter if they aren’t reporting – and therefore able to prove – an acceptable amount.

Bad credit auto lenders generally require borrowers to earn a minimum of $1,500 to $2,000 a month before taxes, and have a debt-to-income ratio doesn’t top 50 percent. These lenders are generally looking for W-2 income, and some may outright reject buyers that get paid in cash.

As proof of income, a computer-generated paycheck stub that shows year-to-date income from the past 30 days is usually enough, although lenders may require three years of tax returns in some instances. Bank deposit records don’t count, since they only prove gross income, not income after expenses.

Other Options for Buyers that Get Paid in Cash

Car buyers with bad credit that get paid in cash have two other options for getting a car:

  • Pay Cash – Whether through a dealership or a private seller, a buyer can avoid problems by buying with cash. While buying with cash helps buyers avoid paying interest and adding a monthly payment to their bills, it also means they can't improve their credit through timely loan payments.
  • Buy Here Pay Here Dealer – Buyers that want financing can try a buy here pay here (BHPH) car lot. These dealerships offer in-house auto loans, meaning they don't rely on outside lenders. All that matters is that the customer meets income qualifications. While getting approved can be a breeze, there are many downsides to this type of loan. BHPH dealers charge high interest rates, sometimes require payments to be made in person on a weekly or biweekly basis, can be very intolerant of late payments, and may not report payments so the loan doesn’t improve credit.

The Bottom Line

Unless they get a W-2 or accurately reflect a qualifying income and debt-to-income ratio on their tax returns, car buyers with poor credit that get paid in cash will have trouble qualifying for an auto loan.

If you're dealing with credit issues and need a car loan, CarsDirect has helped many car buyers find financing with the help of our nationwide network of dealers. We're teamed up with dealerships that specialize in handling unique credit situations, and we'll work to match you with one in your area. Start the process by filling out our secure and free auto loan request form online.

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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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