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Can You Get a Car Loan with Low Income?

Yes, it is possible to get a car loan with low income, but it can be a difficult and frustrating process. Let’s take a look at what the typical requirements are, and what you can do to overcome them.

Traditional Income Requirements

When a lender evaluates your car loan application, gross income is one of the main considerations looked at. After all, a lender does expect to be paid back. As a general rule of thumb, lenders want to see that you have a gross income in excess of $1,250 per month. For some lenders, the minimum income is $1,450 to $1,800 per month.

Even if you have enough gross income, you could be denied if you owe too much money in relation to your income. This is called your debt-to-income (DTI) ratio, and it includes payments for rent/mortgage, insurance, credit cards, the loan being considered, etc. If your DTI exceeds 40 percent, you will have difficulty getting the loan you want. Also, if your credit score is low, you will have to have a lower DTI in order to improve your chances of being approved for a car loan.

What You Can Do

One of the first things that you can do to improve your chances of getting a low income car loan is to get a copy of your credit report. You can get one free copy each year from the three major credit reporting agencies by going to Once you have your credit report in hand you can look for errors or omissions. Correcting either can raise your credit score, improving the likelihood that your loan will be approved.

Next, you can pay down your current debt. Something as simple as paying an extra $25 a month on your credit cards can lower your DTI enough to be the difference between a denial letter and a new car. Other areas to look at are your insurance deductibles, eliminating a home phone, and cutting back on your cable bill. Each will lower your monthly cash outlay.

A third idea is to offer a higher down payment. Lenders look at your down payment as a sign of how committed you are to repaying the loan. If you have a lower income, offering a higher down payment can tempt an otherwise skeptical lender.

Unfortunately, you may need a cosigner. Any cosigner that you have must have good credit, an acceptable DTI, and the ability to repay the loan if you can not.

Do not forget to shop your loan online. There are many lenders who operate online only that specialize in making unconventional loans. To them a person is more than their credit score or income level. You may find the loan that you want without the use of a cosigner or having to jump through a bunch of hoops.

“Ways to Work” Auto Loan

In 21 states, there is a program known as Ways to Work, which provides auto loans of up to $6000 with an interest rate of 8% APR for families with low income and credit problems. This is a low interest rate considering the average credit profile of the borrowers, and a loan amount of $6000 should be sufficient to purchase a relatively reliable used vehicle. Currently, only about 2000 families have availed themselves of such a loan, but the program is growing, with more than 50 sites across the 21 sites where it operates. The program has been happy to report that almost 50% of borrowers have reported a pay increase since receiving their loan, largely due to the greater job prospects a vehicle allows.

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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