Is Income Taken Into Consideration for Auto Loan?

What you make on the job is an important factor lenders consider whenever consumers seek an auto loan or make any request for new credit. Whether applying for credit through the dealer's Finance and Insurance Department, at a local bank or through your credit union, you will be required to fill out a credit application that will ask you about your current employment status, income and other credit-determining factors.

Credit Application

Your credit application will ask you about your sources of income.

The first step you will take in securing an auto loan is to fill out a credit application. That application will ask you for your name, address, contact phone number and your Social Security number. Previous addresses, length of stay at each address, current and former employers and sources of income are also asked. Your income can come from several sources including pensions, alimony payments and income derived from work. You may be asked for your current occupation and monthly income. If you are retired, then creditors may still give you a loan provided your income is sufficient to make payments.

Credit Reports

Your credit report contains detailed information about your financial strength.

Once your credit application is received, lenders will also obtain a copy of your credit report and your credit score. Your credit report will be scrutinized to determine your credit behavior, including whether you make your payments on time, your current lines of credit and your outstanding balances. A credit score in excess of 700 is indicative of a person who manages his credit wisely, according to the Consumer Federation of America and Fair Isaac Corporation. You may still qualify for credit if you have a lower score, but be prepared to pay a higher annual percentage rate on your loans.

Possible Problems

A larger down payment may offset your low income.

If your income is considered too low by a creditor, then you may not be approved for a loan based on that factor alone. However, you may be given the chance to increase your down payment, which would lower your loan payments. In addition, if your income is too low, the lender may suggest that you seek a co-signer. If someone agrees to co-sign your loan, they will be held accountable should you default on your loan. Lending is all about risk -- if the creditor feels you are too big of a risk, then your loan application will be denied.

Considerations

You may need to change or put off your purchase decision if your budget needs help first.

Income, which demonstrates your ability to repay a loan, is an important factor used by creditors when reviewing your loan application. If you cannot put more money down and are not willing and or are unable to get a co-signer, you may need to settle for a cheaper-priced car or put off your purchase decision until you have sufficient funds.