How to Get a Bad Credit Car Loan on Disability

Get Car Financing
Even with poor credit.

By

Contributing Writer

Amy Fortune is a contributing writer for CarsDirect and lead writer/editor for AutoCreditExpress. She also contributes regularly to several other high-traffic blogs. Amy was born in North Carolina and grew up with an appreciation for NASCAR and everything automotive. Now based in the Motor City, she continues to be happily immersed in car culture and automotive finance.


, Contributing Writer - September 30, 2016

It can be difficult to qualify for a bad credit car loan if your primary—or only—source of income comes from disability benefits. However, it isn't impossible.

Subprime lenders are normally hesitant about approving applicants on disability because this income cannot be garnished. This is, of course, risky for the lender because if you default on the loan, it will be harder for them to collect payment. But, fortunately, there are still ways for buyers who receive these benefits to get approved for auto financing.

First of all, you will need to prove that you have been receiving disability for at least six months. You will also need to show that you will continue to receive these payments through the loan term. Next, you will either need to provide proof of an additional income source or get a co-signer for your auto loan. But even if you have neither of these things, another option is available.

Have a Source of Income that Can be Garnished

Most special finance lenders have a minimum income requirement of $1,500 to $1,800 per month. The amount that you receive for disability each month will count toward this requirement. But at least part of your qualifying income must be garnishable.

So even if you have a part-time job that brings in a few hundred dollars every month, this income combined with your disability benefits may be enough to qualify you for financing. In order to provide verifiable proof of these wages, you will need your most recent paycheck stubs. You may also be asked to provide tax records from at least the past year that show your reported income.

Get a Co-Signer with a Qualifying Income

If you do not have another income source, there are other ways to get approved for subprime auto financing. For example, if you can get a close friend or family member with a qualifying income to co-sign your loan, you may be approved.

When someone co-signs a loan, they agree to assume responsibility for the loan if the primary borrower defaults. Their credit rating will also be impacted by the loan. So make sure that your co-signer is fully aware of the risks involved before they commit to sharing a car loan with you.

Be Open to a Buy-Here-Pay-Here Purchase

If disability is your only source of income and you don't have a co-signer, going to a buy-here-pay-here (BHPH) dealer is always an option. These dealerships do in-house financing, so they don't use third-party lenders. This is how they are able to finance buyers without running credit checks.

Also, as long as you can prove that you have a regular income source of any kind, you can typically get approved at a BHPH dealership. The only other things you will need are a valid driver's license and proof of residence (such as a recent utility bill addressed to you).

Just keep in mind that purchasing a car from a BHPH dealer comes with a few drawbacks. First of all, your choices may be limited to used cars with higher mileage. Also, you will probably end up paying more for the vehicle than it is actually worth. And you might be required to go to the dealership in order to make your weekly or bi-weekly payments.

Finally, because many buy-here-pay-here dealers do not report payment activity to the credit bureaus, financing a car this way may do nothing to improve your credit score. Luckily, more and more BHPH dealers are starting to report payments. So if you decide to go to a BHPH dealership, look for one that offers this service to their customers.

Never Assume the Worst

Even though there are general guidelines for approval requirements that most lenders stick to, rules can vary. If you need to get a bad credit car loan on disability, there is a good chance that there are subprime lenders out there that, under the right circumstances, will be willing to work with your situation.

At CarsDirect, we've partnered with thousands of the best car loan providers for consumers with bad credit. So applying with us will give you your best chance at auto financing approval. Go ahead and fill out our simple and secure online application to get started today.

Need a Car Loan?

It only takes a minute.

, Contributing Writer

Amy Fortune is a contributing writer for CarsDirect and lead writer/editor for AutoCreditExpress. She also contributes regularly to several other high-traffic blogs. Amy was born in North Carolina and grew up with an appreciation for NASCAR and everything automotive. Now based in the Motor City, she continues to be happily immersed in car culture and automotive finance.


Loan approval is not guaranteed and is subject to credit application and approval of the lender. Individual loan terms may vary. Use of this website constitutes acceptance of CarsDirect.com's Terms of Use, Disclaimer, Privacy Policy, and Cookie Policy.