How Much Do I Need to Earn Monthly to Get Approved for a Car?
While most people are aware that their credit score plays a major role in their ability to obtain a car loan, very few people realize that so does their income. When you apply for a car loan, lenders will only approve you for a loan amount that they know you can pay. That being said, it is possible to qualify for a low income car loan.
The minimum monthly income requirement will vary from lender to lender. In general, it will be somewhere around $2,000 a month before taxes are taken out. The goal of a bad credit car loan is not to make your credit score worse, but to improve it while also getting the vehicle you need. That is why it is important to understand your finances and create a budget for yourself so you can afford a low income car loan.
How Low Income Car Loan Repayments Work
The first step in knowing how much you need to earn monthly in order to get approved for a car is to understand how car loan repayments work. If you are not in a position where you can afford to meet the payment requirements on your loan, you will have a much more difficult time finding a car loan than other people.
When you do have a car loan, you will need to make repayments over monthly installments for a set period of time. There are a couple of steps you will need to take in order to figure out how much your monthly low income car loan repayments will be. This can be a relatively complicated calculation, however, there are online calculator tools that can help figure these numbers out.
When you understand how car loan repayments will cost, you can look at your budget to determine if it is feasible.
Look at Your Budget
Taking a careful look at your monthly budget and evaluate how a low income car loan will factor in.
In addition to a minimum monthly income requirement, a creditor may take into consideration your debt to income (DTI) and payment to income (PTI) ratios. These ratios are used to determine different aspects of your current financial status.
DTI ratios determine how much of your income goes towards your bills and other expenses. Lenders will typically look for a ratio that is no more than 45 or 50 percent of your gross income. They will automatically include a potential car and insurance plan. This will give lenders a better idea about how much you are spending every month and if a car loan can fit into your budget.
PTI ratios are calculated using a combination of your estimated monthly car and insurance payments, divided by your monthly income. It is important for lenders to see that you are not spending too much of your monthly income on a car loan. They will typically set the maximum ratio somewhere between 15 to 20 percent.
By knowing these ratios you will be able to create a realistic budget for yourself. This will make it that much easier to successfully pay back your low income car loan.
Be Realistic About Your Vehicle Options
It is extremely important to be realistic about what vehicle options you can afford, especially when applying for a low income car loan.
Financial lenders will only approve you for a car loan that they know you can pay back, so choosing a car that is out of your price range will only get your application rejected. You want to make sure that you only finance a car that you can afford, that way you are not making higher payments every month than what is actually manageable. Living outside of your means can be a fast way to negatively impact your credit history.
As previously mentioned, it can be helpful to figure out what your PTI ratio is. By making this estimate with different monthly car payments, you will be able to gain a better idea of the right price range you should be sticking to.
Research Your Financing Options
Exploring what your different financing options are will let you know what choices are available to you – and which ones are not. You may have a difficult time obtaining a loan from your bank, depending on their requirements. This means you might have to find alternative financing sources.
You can also lease your car instead of taking out a line of credit, which is more similar to a long-term rental.
Additionally, if you are also in a situation where you are dealing with bad credit, you can apply for a low income bad credit car loan with a special finance dealership, such as Autoloan.ca. We provide car loans for everyone who meets our application qualifications, regardless of what their current credit situation may be. We will be able to arrange a loan for you from one of Canada’s leading banks so that you do not have to worry about the hassle.
Which financing option that works for you will depend on your unique financial situation.
Low Income Car Loans with Autoloan.Ca
Autoloan.ca offers services in order to assist people find car loans when there are no other options available.
All lenders will require you to make a certain amount of every month in order to qualify for their loans and Autoloan.ca is no different. In order to meet Autoloan.ca’s requirements for a low income car loan, you must earn a minimum of $2,200 a month. This working income amount should be provable and financial support from the Ontario Disability Support Program and/or Ontario Works does not qualify for consideration.