Getting the car of your dreams with bad credit is already tough enough. But it can be even harder if you do not have a job and your income is fixed from Social Security or disability. If you are in the market to buy a car on a fixed income with good credit, your odds of approval should be high. Unfortunately, for buyers with bad credit and on a fixed income, it can be much more difficult.
For starters, most subprime lenders, the lenders that work with poor credit, will review all applicants equally. However, most lenders will require an income between $1,400-$2,200 per month before taxes. This amount can also include any income from Social Security or disability that you may be receiving.
Subprime lenders also tend to have other income-based requirements. These requirements can include your payment to income ratio and also your debt to income ratio. Most lenders will be slightly lenient with these when it may come to fixed incomes.
When consumers have fixed income and bad credit, the subprime lenders will also look at your debts to see if they were “habitual”, such as shopping sprees, or “situational”, such as an emergency medical expense. If your debts are from situational spending, your chances of getting approved could be even higher.
However, Social Security benefits and other tax-free forms of income cannot be garnished. Meaning that if you failed to stop making payments on the vehicle, your lender cannot garnish your wages, adding a large amount of risk to the subprime lender.
Can a person on a fixed income with a bad credit score get a subprime car loan even though your income may not be garnishable? In most cases, this answer will usually be no, unless you can provide the following below:
You get a cosigner:
If you decide to go this route, this cosigner will need to be somebody with garnishable income. They cannot be solely reliant on a fixed income such as social security. The lender will go through the same requirements with your cosigner as they would if you were applying alone.
Get a W2 or 1099 income form:
In order to get garnishable wages, you can get a part-time or odd job that provides you with a W2 or a 1099 form. This in addition to your fixed income could be enough to get you approved. See what the minimum amount is that your lender needs to be able to garnish in case of default.
As a last resort, you can always turn to a “Buy Here, Pay Here” dealership. This type of dealership will provide financing through their own in-house financing department. Make sure that if you do decide to use a Buy Here Pay Here dealer that they report all your payments to the 3 credit bureaus to help improve your credit score.
All in all, if you have bad credit and are trying to finance a car sale, you need to find a subprime lender who can work within your budget and location. CrediReady offers one of the largest databases that connects dealerships, lenders, and buyers in all credit situations. Take a few moments to fill out our free and confidential loan search form online and we will match you with a dealership in your local area that can meet your auto financing needs.