Whether or not you can finance a car with a part-time job greatly depends on how “part-time” the job is. To be more clear, you will face challenges to a loan based on your monthly income and debt-to-income (DTI) ratio. If you earn sufficient income from your part-time work, and your DTI is healthy, then you can get approved. However, your past credit and down payment could pose additional problems.
The first challenge your car loan application will face is your income. The majority of lenders require that you have a minimum monthly gross income of $1,400 before a car loan will be offered. You may find a few credit unions and finance companies who will consider an income as low as $1,250 per month. If you work full-time, 40 hours per week, this would equate to a wage of just $7.80 per hour. If you work just 20 hours per week, you’ll need to make $15.6 per hour. As you can see, it certainly isn’t impossible to earn sufficient income, even if you’re not employed full-time. If you don’t earn at least $1,250 a month, someone who does can co-sign the loan, thereby circumventing this obstacle.
The income requirement leads right into the next challenge, your DTI. Lenders want to see that you have a DTI that is 35 percent of your gross income or less. If you have no credit or bad credit, you may need to have a DTI under 30 percent. If you have excellent credit, your DTI may be as high as 40 percent. With an income of $1,400 and excellent credit, you can only have $560 a month in recurring payments, including the payment on the car loan your are applying for.
Lastly, with a low income, your’s may be considered a high risk loan, requiring a substantial down payment. That could be anywhere between fifteen and thirty percent of the total purchase price of the car you want.
What Can Be Done
You have two realistic options. The first is to simply delay buying a car until you have saved more cash, then buy a less expensive vehicle without obtaining a loan. If you can not do that, you could search online for a specialty lender, Many of these lenders have looser lending guidelines than traditional banks. A loan through one of these lenders will require a higher interest rate than you may like and the repayment term will be shorter, but you should be able to find the car loan that you need.