Not everyone has a W-2 job that provides them with a computer generated pay stub every two weeks. If you’re in this boat with income that isn’t W-2 and need a car loan, here’s what the lender is most likely to ask you to prove your income.
Prove your income for a car loan
If you’re earning W-2 income and you just don’t have your pay stubs at home or readily available, contact your employer or the human resources department. They should be able to send you copies of your computer-generated check stubs by mail or electronically.
Prove that you have an income paying off a car loan is one of the most important steps in getting approved for financing. If you don’t get or don’t have check stubs to prove your income, the lender will likely ask you two to three years of tax returns.
Many borrowers wonder if bank statements showing deposits of their income would suffice, but this is usually not the case. Unfortunately, bank statements only prove that you have the money, not where it came from, so lenders don’t often accept them. It also doesn’t prove that the income is reported or taxed, and it may not accurately reflect what you earn each year.
To qualify for a car loan, many subprime lenders require you to earn around $ 1,500 to $ 2,500 per month before taxes. Lenders look at your gross income, not your net (take it home). When listing your income, be sure to include your gross income, as this could mean the difference between an approval and a denial if your income is near the threshold.
1099 Income and auto loans
Many freelancers, entrepreneurs, and business owners have an income of $ 1099. Auto lenders may be able to accept this type of income if it is provable and stated.
But that’s not the only thing lenders are looking at.
If you have less than perfect credit and 1099 income, then expect a subprime lender to review your employment history as well as your income. Regardless of your income type, bad credit lenders look at other aspects of your financial stability to determine your ability to take out a car loan.
They sometimes require a consistent three-year work history with no large gaps between jobs (30 days or more is generally considered a large gap). A subprime lender may also require that you have worked at the same workplace for about a year.
There are also employment scenarios that subprime lenders agree to on a case-by-case basis. This includes the recent change of job in the same field of work. Suppose you are an entrepreneur who recently started a project for a new business two months ago. While it might not be a year, if you are doing the same type of work, a subprime lender may accept it as a qualifying work history.
Bad credit lenders review your work history because a consistent and stable work history increases your chances of successfully closing the auto loan. The more stable you are in terms of income, work history, and even life situation, the better your chances of getting approved for the car loan.
Proving other types of income
If you don’t have a W-2 or 1099 income but regularly receive some other type of income, you are not unlucky.
Some auto lenders, including subprime lenders, may accept other sources of income such as permanent disability, alimony, child support, or Social Security. Some lenders only accept these sources of income as secondary income, but it varies.
Proving this income usually means providing an award letter that proves that you will receive this money for the duration of the car loan you are applying for. They can also request your tax returns, and possibly your bank statements to show you have access to the money.
Auto loans for bad credit
Even if you have enough income to pay for a vehicle and your tax returns are aligned to prove that you are ready and able to make the payments, that may not be enough if you have less than perfect credit. However, subprime lenders understand that your credit score doesn’t always reflect your creditworthiness in a perfect light.
To be matched with a dealer registered with subprime auto lenders, start here at Auto Express Credit. We have created a network of dealerships equipped to help borrowers with credit problems. Start your car buying journey by completing our auto loan application form, and we’ll direct you to a dealer near you with subprime loan resources.