Securing a car loan can feel daunting, especially if you’re navigating the process with less-than-perfect credit and relying on part-time income. Many believe that a full-time job is a prerequisite for auto financing, but that’s not always the case. The good news is that buying a car with a part time job is indeed possible under the right circumstances. When lenders assess your loan application with a less-than-ideal credit history, your income takes center stage in the car-buying journey.
It’s perfectly acceptable to have multiple part-time jobs or for your primary employment to be part-time. However, it’s crucial to understand that certain income thresholds must be met to gain approval for auto financing. Let’s delve into how you can navigate the car buying process successfully with a part-time job.
Understanding Car Loans with Part-Time Income
For over two decades, cardiagxpert.com has been dedicated to assisting car buyers with bad credit in finding dealerships that offer financing solutions for both new and used vehicles. Throughout this extensive experience, we’ve addressed countless inquiries from applicants, many revolving around the income prerequisites for subprime car loans. A frequently asked question is: “Can I get approved for a car loan if I have a part-time job and my credit isn’t great?”
The answer is affirmative. Individuals with poor credit and part-time employment can indeed qualify for a car loan. Subprime lenders, who specialize in assisting borrowers with credit challenges, prioritize qualifying income rather than the number of hours worked to earn it. Essentially, if your part-time job generates income that meets or surpasses the lender’s minimum income requirements, your loan application will be given due consideration. For instance, if a lender stipulates a minimum monthly income of $1,500, your application will be reviewed as long as your part-time job income is $1,500 or higher.
Lenders typically focus on the income from one job to meet the minimum income threshold. However, they might consider income from a second job to evaluate your Debt-to-Income (DTI) and Payment-to-Income (PTI) ratios. If your income from a single job falls short, a spouse as a co-borrower could be beneficial. If you lack a consistent three-year employment history without significant gaps, a cosigner might be a viable solution. Conversely, if a substantial portion of your part-time income comes from tips, inaccurate income reporting (excluding tips) can negatively impact your DTI ratios and hinder your approval chances.
While adding a co-borrower or increasing your down payment can strengthen your application, they don’t automatically guarantee approval if income issues persist. Ideally, before visiting a dealership, explore pre-approval options from your bank or credit union. A solid payment history with them might lead to more favorable loan terms than you anticipate.
Key Requirements for Part-Time Income Car Loans
Subprime lenders are the primary providers of bad credit auto loans. These specialized lenders look beyond credit scores, focusing on factors like income and employment stability. While specific requirements vary among lenders, there are three common criteria:
Minimum Income
Subprime lenders generally prefer to see a pre-tax monthly income ranging from $1,500 to $2,500 from a single job. You can substantiate your income by providing a recent pay stub showing year-to-date earnings or, if self-employed, two to three years of recent tax returns.
Debt-to-Income (DTI) Ratio
Lenders typically aim for a DTI ratio of 45% to 50% or lower. To calculate your DTI, divide your total monthly debt obligations (including estimated car and insurance payments) by your pre-tax monthly income.
Payment-to-Income (PTI) Ratio
A preferred PTI ratio for lenders is generally 15% to 20% or less. Your PTI is calculated by dividing your estimated monthly car payment by your pre-tax monthly income.
Person Signing Car Loan Documents at Dealership
However, most lenders also have specific guidelines regarding part-time employment, particularly when applicants hold multiple part-time positions. In such cases, only one job’s income is considered for meeting the minimum income requirement.
Here’s a practical illustration:
Consider Applicant A, who has two part-time jobs. The first job provides a monthly income of $1,700, and the second contributes $300 per month, resulting in a total monthly income of $2,000.
Now consider Applicant B, also with two part-time jobs. The first job yields $1,200 monthly, and the second provides $800 per month, also totaling $2,000 in monthly income.
If a lender’s minimum monthly income requirement is $1,500, Applicant A’s income would qualify, while Applicant B’s income would not. Despite both applicants having the same total income, only Applicant A qualifies for a car loan with a part time job because the income from their highest-paying job meets or exceeds the lender’s minimum requirement. If you’re unsure about your qualification potential, utilize a car loan estimator tool for a preliminary assessment.
The Bottom Line
The crucial takeaway is that insufficient income from a single job, whether part-time or full-time, will likely result in auto loan denial. If your income is tip-based, ensure accurate and comprehensive reporting. If you need to bolster your approval chances due to income limitations, consider a spouse as a co-borrower.
Most subprime lenders are willing to consider income from part-time employment, provided it satisfies their minimum income criteria. However, it’s essential for borrowers with poor credit to remember that regardless of the number of part-time jobs held, only the income from one job will be used to determine if the minimum income threshold is met.
This doesn’t negate the value of a second job when applying for a car loan. The additional income can be instrumental in meeting the debt-to-income ratio requirements associated with auto loans.
Another helpful tip: cardiagxpert.com specializes in connecting individuals with less-than-perfect credit to car loan options. We collaborate with a nationwide network of dealerships that can offer realistic opportunities for auto loan approvals.
Meghan Carbary, Senior Automotive Financing Editor at Auto Credit Express, brings expertise in helping readers understand complex auto financing topics.
