What is the Minimum Monthly Income for a Car 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 - July 26, 2018

There's no universal minimum monthly income for a car loan because it varies by lender, but most require you to make at least $1,500 a month before taxes.

Car Loan Income Requirements

Preparing before applying for a car loan is an important part of the process that'll help you know what to expect and plan accordingly. This is especially true if you're trying to qualify for an auto loan with a low income. One of the best things you can do is learn about car loan income requirements.

While your credit score plays a major part in determining how much car you qualify for, your income is very important, too. Simply put, lenders only approve loans based on what you can afford to pay. There are three main car loan income requirements you need to be aware of:

  • Minimum Income Requirement: All lenders require you to make a certain amount every month. While it can vary, the typical monthly minimum income requirement many special finance lenders have is $1,500 to $2,000 before taxes are taken out.
  • Debt to Income (DTI) Ratio Requirement: This is the percentage of your monthly pre-tax income that's dedicated to paying all your bills. To find it, add up all of your monthly bills (the estimated car and insurance payment, other loan payments, rent/mortgage, credit card payments, etc.) and divide the sum by your monthly income. The DTI limit for most lenders is usually around 45 to 50 percent.
  • Payment to Income (PTI) Ratio Requirement: The PTI ratio is the percentage of your income that goes toward your car loan and insurance payment, found by dividing the estimated sum of those two by your gross monthly income. Typically, lenders cap your PTI limit at somewhere between 15 to 20 percent.

Along with your credit score, these three income requirements determine the kind of loan you're able to qualify for, from your eligibility in the first place to your maximum monthly payment, loan amount, and term.

How to Qualify for a Car Loan with Low Income

While you have to make a certain amount per month in order to get approved, it's possible to qualify for a car loan with low income. As you can see from the income requirements above, what you qualify for has just as much to do with what you spend in relation to what you make and the price of the vehicle you're shopping for.

If you need a low income car loan, we recommend that you take these steps:

  • Check your credit reports and at least one credit score – You should know where your credit stands before taking out any loan. There are many ways to access your score for free, but you can also pay a small fee to get it directly from the credit bureaus (Experian, TransUnion, and Equifax). As for your reports, you're entitled to a complimentary copy every 12 months from each of the three bureaus that you can request on www.annualcreditreport.com.
  • Look at your budget and calculate your ratios – Take a careful look at your budget to evaluate how an auto loan fits in. You should also calculate your DTI and PTI ratios ahead of time to see where you stand.
  • Be realistic about your vehicle options – You want to make sure that you only finance a car that you can comfortably afford, especially if you're dealing with a low income. By estimating your PTI ratio with a number of different monthly car payments, you can get a better idea of the price range you should stick to.
  • Research your financing options – Explore different financing sources to learn more about what may be available. Talk to your bank or credit union about their requirements, and apply to get pre-approved if you meet them. You can also contact other major lenders or banks to see if they can help. If you're dealing with less than perfect credit, you can discuss financing options with a local special finance dealership or buy here pay here car lot.

Low Income and Bad Credit Auto Loans

If you're trying to get a car loan with low income, knowing the typical requirements and what to expect can help prepare you for the process, but working with the right dealership is just as important if you're dealing with bad credit.

At CarsDirect, we want to help match you with a special finance dealership in your area. We work with dealerships across the country that specialize in getting people in unique situations financed. Start the process right now by submitting our secure 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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