What is the Minimum Income Requirement for a Bad Credit Auto Loan?

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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.


, Contributing Writer - November 7, 2016

The minimum income requirement for a bad credit auto loan is typically around $1,500-$1,800 a month gross (before taxes are taken out). However, it should be noted that this requirement can vary from lender to lender.

The Minimum Income Requirement for a Bad Credit Auto Loan

Subprime lenders are willing to approve bad credit auto loans, but they carefully evaluate your application. They want to make sure that you meet their requirements and you are able to verify that you do. And one of these is a minimum income requirement.

It varies from lender to lender, but the typical minimum income requirement for a bad credit car loan is $1,500-$1,800 a month in gross wages. "Gross" means what you make before taxes (and any other deductions) are taken out.

Subprime lenders set such a requirement to create a realistic budget for your car payment, which gives you the best chance at paying back the loan and reestablishing your auto credit.

You will also need to provide proof of income at some point during the process. Usually, a computer-generated paycheck stub with your year-to-date earnings on it dated within the past 30 days is what they want to see.

Your Income Level Isn't the Only Thing that Matters

Another step that a subprime lender will take is calculating both your debt to income (DTI) ratio and your payment to income (PTI) ratio. These figures are going to give them a better idea of how your finances stack up when a car payment (plus an insurance payment) are added to the mix.

Your DTI ratio can be found by dividing your total monthly expenses by your gross monthly income. When calculating yours, lenders will also factor in an estimated car and insurance payment. And, generally, they don't want your DTI ratio topping 50%.

This ratio is easy to calculate yourself, and we would recommend that you do so before applying. Start by adding up all of your regular bills, such as your mortgage/rent, credit card payments, loan payments, average utility payments, and whatever else that must be paid every month. Then divide that figure by your monthly income to get your DTI ratio.

At the same time, lenders don't want your car payment and insurance payment to exceed 20% of your monthly income. So, they will calculate your PTI ratio by adding together an estimated monthly car and insurance payment and dividing it by your income. You can also easily calculate your own PTI ratio by using an auto loan calculator.

To sum up, lenders typically don't want your DTI to top 50% or your PTI to top 20%, and it's easy to see why. They want to make sure that you can afford a car payment, and these methods help set a realistic car buying budget for you.

The Bottom Line

Hopefully you now see why subprime lenders have minimum income requirements for bad credit auto loans. If you are ready to move forward with the bad credit auto loan process but are struggling to find a dealership that can help, CarsDirect has the solution.

We help people with problem credit find a dealer near them that is signed up with subprime lenders. We make the process of getting approved fast, easy, and hassle-free. All you need to do is complete our free and secure 1-Step Auto Loan Application and we'll get to work for you.

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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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