In
this day and age owning a car is a necessity. A car is no longer a
luxury but an essential investment for an easy life. You may require a
car for college or work especially when you need to commute long
distances. An important aspect of getting a car loan is your monthly
income. If you are a first-time car buyer or if your monthly income is
low, you can still avail an auto loan. Understand all about how to avail
an auto loan while you suffer from limited income.
Low Income Auto Loans: Pointers to Keep in Mind
The following factors will help you to understand how you can obtain an auto loan if you have a low income.
1. Buy a Car That Fits Your Budget
When
you have a low income, look for a car that is within your budget.
Exceeding your budget because you are tempted to buy a new car will not
get you a good deal. Buy pre-owned vehicles that are cheaper than new
cars. You can also look at older car models that are no longer up for
sale or demo cars at the dealership lot. Also, make sure that you are
able to make a down payment of at least 20% of the total cost of the
car. Do not exceed the loan term by more than 60 months. Once you take
your budget into consideration, you can avail an auto loan, even with a
low income.
2. The Debt to Income Ratio
A
debt to income ratio calculates the total debt that you owe against
your current income. You may receive faster approvals on your car
financing if your debt to income ratio does not exceed 40%.
Additionally, get rid of your previous loans or debt because when a
lender calculates your debt to income ratio, they may include the amount
of the current auto loan along with the car insurance. Therefore, aim
at maintaining a lower debt to income ratio especially when you want to
get low income auto loans.
3. Income vs. Expenditure
Usually,
a lender requires $1500 as the minimum gross monthly income to approve
an auto loan. However, if your income is lower than $1500, there may
still be a chance you can avail the auto loan. Lenders make use of the
payment to income ratio, i.e., your monthly car payments divided by your
pre-tax income. A payment to income ratio of 15% will get you through
auto loan approval. However, in order to increase the chances of your
approval, try to reduce your monthly expenditures in a way that you can
display more savings per month.
Stay Away from Factors that sabotage your Chances
Since
income is an essential element for getting auto loan approval, make
sure you take care of certain factors that could sabotage your deal. For
instance, do not overlook the cost of title fees, registration,
insurance, etc. The total cost of car ownership is an important element
especially when you have a low income. Additionally, employment is an
important aspect and lenders usually prefer people who have been
employed at the same place for at least one year. Therefore, if you are
thinking of switching jobs, wait until you get your auto loan. So, make
sure you manifest the image of a credible borrower to get the most out
of a low income auto loan.
Got low income? You can still buy a car. Apply for low income auto loans online. Choosing a reliable bad credit auto financing company will help you make a car purchase at affordable interest rates. Get in touch today.
