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Can You Get a Car Loan on Disability?

Yes, you can get a car loan while on disability. You may find getting a loan a bit more challenging than it was prior to your disability, but it is possible. In reality, your likelihood of approval – as well as the terms and conditions of that approval – will come down to key factors:

  • Ability to Pay
  • History of Payment

Let’s look at each in turn.

Is Your Disability Income Sufficient?

Lenders are going to look at the same things they would for a non-disabled person. The first being your ability to repay the loan. That will come down to how much your disability income is compared to the payments that you currently have. Most auto lenders are going to want to see a pre-tax income of at least $1500 per month. What’s more, they will want to ensure that your debt repayment, including the loan that you are applying for, accounts for less than 50 percent of your after tax income. These are the two crucial requirements when it comes to ability to pay.

Do You Have a Strong History of Debt Repayment?

Next, lenders are going to look at your credit history. This is going to determine the interest rate you are offered, the length of the loan, and how large your down payment will need to be. If you had excellent credit prior to your disability, you should be offered favorable terms in all of these categories. If not, then you will be offered a shorter loan term at a higher interest rate, and the lender will require anywhere between 20 and 50 percent of the purchase price as a down payment. This minimizes risk for the lender, making the arrangement more favorable for them. Of course, most dealers will give you trade equity on your existing vehicle, so factor that into your down payment calculations.

Receiving disability income won’t necessarily be the stumbling block to you getting a car loan. However, your income and credit history could be.

About the Author

The author has many years of experience in automotive finance and insurance. However, each consumer's situation is unique. It is best to contact a finance specialist for further assistance.
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