Lenders who specialize in loans to those with subprime credit require documented evidence of income.
Income must be documented on professionally prepared and filed tax returns for the past two years. Additionally, your 1099 forms verify that your income has a documented source, another requirement for obtaining a bad credit loan, along with any child support that you might receive.
In other words, even if you make $100 K “off the books,” this income will not help you when you apply for self employed auto loans. If this revenue is not reported correctly, there will be no evidence that you make that much income. Then again, if you have that kind of revenue, you could probably pay cash for your car.
Minimum Income For Self Employed Car Loans
Lenders who specialize in self employed bad credit loans require that borrowers can prove that they make the minimum income specification set forth by the lending company. This minimum income limit varies by lender and borrower because the limit is calculated as a ratio, specifically a debt-to-income ratio.
If you make $100 K per year, but your bills account for $99 K, your debt-to-income ratio is very high, and you will not meet the minimum income requirements. However, if you make $ 25 K per year, and your bills account for only $2 K, you will likely qualify!
You must be able to prove that you have an income that is at least in the defined range.
As a rule, lenders who provide self employed loans to those with poor credit have documented minimum income requirement for borrowers. This minimum limit usually ranges between $1,500 and $1,800 per month. You must be able to prove that you have an income at least in the defined range, whether you are self employed, or are a W2 employee.
However, even if your income falls within this range, you will still need to prove to the lender that your debt-to-income ratio is within an acceptable range.
Even self employed people with outstanding FICO scores can run into problems when they apply for loans for self employed status. If their debt-to-income ratio is out of balance or if they have incurred several debts, qualifying for an auto loan can be a little more difficult at most places.