How to Get a Car Loan While on Disability Income

A lot of things change when you go on disability income. While those benefits allow you to pay living expenses as you cope with your disability, the income doesn’t cover much beyond the bare essentials. Just because you’re on a budget, however, doesn’t mean you must be without your own transportation. Although it may prove more difficult for disabled individuals to get a loan to buy a car, it is not impossible with proper planning.

Image: Credit Karma

Step 1: Assess your creditworthiness objectively. There are several websites, including Credit Karma, where you can get a free copy of your credit report once annually.

Before applying for any type of loan, it is wise to know just what lenders (banks or other institutions that finance loans) will see about your ability to repay a car loan. That way, you can review the information for accuracy.

If there is information you think should not be included, you can file a dispute with each of the three major credit ranking agencies – Experian, TransUnion, and Equifax – that will be investigated and possibly removed. You should be informed of the results of any investigations within 30 days of filing a dispute.

Step 2: Add up any income outside of your disability. Those receiving disability benefits are permitted to work limited amounts without losing their Social Security Disability Income (SSDI).

It is possible to work up to 80 hours with less than $810 a month in outside earnings. Any outside income not only makes living on limited funds more palatable but also increases your chances of being approved for financing on an automobile.

Step 3: Determine how large of a loan you need. Whether you have income outside of your SSDI or not, it is highly unlikely you will be approved for a loan large enough to buy the latest sports car model that tickles your fancy or other vehicle with a high price tag.

As a general rule, lenders will only approve an automobile loan with a total amount less than or equal to about 35% of your annual income. So, add together your annual SSDI and outside sources of income and multiply that by .35 to arrive at the highest amount you can reasonably apply for in a loan.

Step 4: Consider a co-signer. If your credit report and total income paint a bleak picture for financing approval, there is still hope for buying a car.

Look for a co-signer on your desired loan; family members and close friends are your best people to approach.

Just bear in mind that, if you fail to make your payments, your co-signer is responsible for taking up your slack. This could potentially destroy a valued personal relationship, so don’t ask a person to take a risk on you if you are unsure of your ability to pay off the loan on time.

Step 5: Submit your applications to lenders. Once you have your income added, an amount in mind for the loan, and possibly a co-signer, approach lenders about financing.

Your bank is likely to extend you the best interest rate, while car dealerships with in-house financing are the most likely to approve financing with a higher interest rate. It doesn’t hurt to check with multiple sources, however; this increases your chances of finding an approval, and you may even be afforded the chance to choose the best deal on a loan for you.

Although being disabled and living on disability benefits limits a lot of options available to you, it doesn’t mean you have to be a total pauper. Having your own transportation goes far in making day-to-day errands manageable and provides a sense of freedom and pride. Go step by step through this process of getting an automobile loan, and you will be far closer to owning your own car. Be sure to have one of YourMechanic’s professionals perform a pre-purchase inspection before you buy the car so you can know it is in top shape.


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