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Auto Loan with Really Low Income

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Anonymous
Not applicable

Auto Loan with Really Low Income

What ways can I get a car loan? I'm 21 in college, and I graduate in exactly a year. During the school year, I worked about 10 hours a week, but for the summer, I'll start working the same job working 40 hours a week. So I can't show my past paystubs. Second, my job pays close to minimum wage. But I could even handle about $200 per month, even during the school year.

 

Both of my parents (divorced) have poor credit (in the 500s) and no cash to lend me. However, both have decent incomes and would be able to help me with a monthly car loan.

 

I have $1500 in savings, which is the money the insurance company gave me after my car was totaled (not my fault). My credit score is 710.

 

Do you think a bank would give me a car loan on my own? I plan on financing about $8000 to $10000. If not, are there any creative ways I can get a loan with the help of my parents? They would do almost anything to help me get a car.

16 REPLIES 16
Skye12329
Valued Contributor

Re: Auto Loan with Really Low Income

You could have your parents co sign which would allow you to use their income. Even though their scores are lower a car isn't super hard to qualify for due to it being secured loan. A down payment possibly a little larger might be needed though.

Otherwise once you start working 40 hours and get some paystubs you could try going on your own also.
BK7 - 2/21
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Costco - 6800 (8/25)
Message 2 of 17
StartingOver10
Moderator Emerita

Re: Auto Loan with Really Low Income


@Anonymous wrote:

What ways can I get a car loan? I'm 21 in college, and I graduate in exactly a year. During the school year, I worked about 10 hours a week, but for the summer, I'll start working the same job working 40 hours a week. So I can't show my past paystubs. Second, my job pays close to minimum wage. But I could even handle about $200 per month, even during the school year.

 

Both of my parents (divorced) have poor credit (in the 500s) and no cash to lend me. However, both have decent incomes and would be able to help me with a monthly car loan.

 

I have $1500 in savings, which is the money the insurance company gave me after my car was totaled (not my fault). My credit score is 710.

 

Do you think a bank would give me a car loan on my own? I plan on financing about $8000 to $10000. If not, are there any creative ways I can get a loan with the help of my parents? They would do almost anything to help me get a car.


^^^I think this is a poor plan IMO. 

 

If your parents have decent incomes and no savings that means they are living paycheck to paycheck and it would be a burden on them to squeeze in your extra $200/month auto payment. If they had the extra income, it would be going to savings.

 

A better solution for you, for the short term, is to buy a cash vehicle with the $1500 you have + any savings you may have on hand. It is only for a year. Or work your tail off this summer and save every penny for a cash car in the fall.  The last thing you need is a car payment on less than min wage for 10 hours per week during the school year. 

 

Once you graduate and get a job/steady income, then you can get a vehicle that you can afford monthly. Many people here have had repos' due to taking on a car payment that felt they could handle but couldn't make the payments. Remember, you have auto insurance to pay too and at your age it is likely to be very high. 

Message 3 of 17
Anonymous
Not applicable

Re: Auto Loan with Really Low Income

I appreciate your advice, however, I'm not asking whether or not my parents I can afford this car. I've tired the cheap car thing already. I bought a car for $2500 3 years ago and spent thousands in repairs just to have it "totaled" after a minor accident. I rather get a newer car.

 

I guess what I'm really asking is:

1) Is there anyway I can get a decent interest rate by cosigning with my parents? Somehow combine my good credit with my parents good income?

2) Should I be able to get a car loan with a gross monthly income of $1280? If so, how does income verfiication work? I really need this car before I get my paystubs.

3) What banks do you suggest I try?

Message 4 of 17
Anonymous
Not applicable

Re: Auto Loan with Really Low Income

Any lender looking at your application alone will say no, because your income does not support the payment.  They will look at your average income, not just your seasonal summer income, amd you will likely fail a debt-to-income analysis with a threshold of 30% or less.

 

Using one of your parents as a cosigner, they will consider the application as a whole, but both credit scores/histories will be considered.  Whichever of your parents has the higher score/income should be your cosigner.  Their low credit score will still put you in a subprime (much higher) interest rate than a 710 alone would, but that is the price of not having independent income, as is your situation right now.  An $8000 car, with no GAP or extended warranty, with tax/title/license and interest appropriate to a credit score in the 500s is going to have payments of $250ish on a 4-year note.  Insurance for an under-25 driver - full coverage, as is required by every single lender out there - is going to run you another $150+ a month, depending on your location, and may be even higher than that depending on your gender, driving record, and what type of car you choose.

 

The advice given earlier about using a cash car until you graduate and get a steadier, larger income was not meant as an insult, it is sound advice.  You don't want to follow it, which is fine, but it is going to cost you in interest and insurance, that's all we're telling you.  With a good score like yours, once your income improves you can seek a refinance in your own name alone, and get a better interest rate, but for at least the next 18 months or so, you'll be stuck with the subprime one you can get with your parent's cosignature.  The insurance cost has nothing to do with your employment and is merely a function of your age and the type of car you ultimately choose.

Message 5 of 17
TRC_WA
Senior Contributor

Re: Auto Loan with Really Low Income

Everything hmw said... ^

 

Also... does your good credit include a previous auto loan?  Because if it doesn't you are facing an uphill battle in addition to  your income issues.

 

Lenders will deny you for "not enough installment auto loan experience."

 

When I bought my $40k car in 2015 I had previous auto loans in the $7k to $20k range dating back to 1997...  didn't matter in the eyes of my CU though... they denied me because I didn't have experience with an auto loan that was double my previous high auto loan.

 

I got approved anyway at a different CU.

FICO8 current as of : 10-20-25 EQ: 736 TU: 728 EX: 722
Hard INQs last 12 months: EQ: 0 | TU: 0 | EX: 0
Verizon Visa $8500 Amex Delta Reserve $10,000 Care Credit $18,000
NFCU CashRewards $7500 Apple Card $7000 Best Buy $8000 Amazon $5000
NFCU auto loan (2022 Ford Bronco Sport Badlands - Cactus Gray) 6.95%
NFCU motorcycle loan (2024 Harley Davidson Road Glide - Alpine Green & Chrome) 9.45%
Total CL: $64,000 --- Total CC UTI: 31% --- AAoA: 6.5 years --- Income: $200k
Last app: 4-6-24
Message 6 of 17
RonM21
Valued Contributor

Re: Auto Loan with Really Low Income

It sounds like unfortunately, your best bet is to improve your profile a bit, before trying to get into something like this. That doesn't mean it can't happen, but even if it does, the terms probably would not be good.


Total CL: $321.7kUTL: 2%AAoA: 7.0yrsBaddies: 0Other: Lease, Loan, *No Mortgage, All Inq's from Jun '20 Car Shopping

BoA-55k | NFCU-45k | AMEX-42k | DISC-40.6k | PENFED-38.4k | LOWES-35k | ALLIANT-25k | CITI-15.7k | BARCLAYS-15k | CHASE-10k

Message 7 of 17
Anonymous
Not applicable

Re: Auto Loan with Really Low Income

I was in the same boat as you OP. I'm 22 graduated last year. Do you have a good solid relationship with a local credit union? I was approved for 20k @ 1.74%. Credit score was 725 when they pulled it. AAoA 15 months. 1% utilization. It's definately possible. Good luck!

Message 8 of 17
Anonymous
Not applicable

Re: Auto Loan with Really Low Income

Which ur score u can get a loan with "stated" income. U just need to calculate what u can afford for a monthly payment. If just need a car to get around I'll recommend something below 20k out the door like a civic or Corolla or something in the like where u can stretch it out to 72 months and payments be about 300 a month. I'll recommend buying brand new as to you wont need to worry about repair and stuff for at least 10 years beside your regular oil change and tires replacement. I got an auto loan when my score was in the 450 15 months ago when I was rebuilding. My interest high as heck for a 19400 Honda Civic I was paying 447 a month with nothing down

Message 9 of 17
Anonymous
Not applicable

Re: Auto Loan with Really Low Income

 

@Anonymous wrote:

Which ur score u can get a loan with "stated" income. U just need to calculate what u can afford for a monthly payment. If just need a car to get around I'll recommend something below 20k out the door like a civic or Corolla or something in the like where u can stretch it out to 72 months and payments be about 300 a month. I'll recommend buying brand new as to you wont need to worry about repair and stuff for at least 10 years beside your regular oil change and tires replacement. I got an auto loan when my score was in the 450 15 months ago when I was rebuilding. My interest high as heck for a 19400 Honda Civic I was paying 447 a month with nothing down


Yea this doesn't seem to be the best financial advice. I don't plan on payments that high with my little income. I want them to be under $200. That's why I was looking for a loan around $10000. But thank you!

Message 10 of 17
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